Mergers & Acquisitions
Each week, Viridian publishes insights and analysis on completed M&A transactions in the prior week. Our analysis includes:
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- M&A Market Commentary
- Public and Private Companies
- Buyers & Sellers
- YTD M&A Analysis
- M&A by Industry Sector
- Deal Structure and Valuation Analysis
- Pending Deal Risk Arb Analysis
- Valuation Gap Analysis
Transaction Summary
- Two transactions closed this week for a disclosed total value of 13.0M, compared to two transactions for a total value of $7.50 in 2023.
YTD Analysis
- YTD, 28 M&A transactions have closed with a total disclosed value of $131.83M, down sharply from the 47 deals for $867.28M in 2023. M&A is off to the lowest start of the last six years.
Pending Risk Deal Arb Analysis
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- On the final Friday before the deal was canceled, the Cresco/Columbia deal spread widened to 107.2. No one can pretend to be surprised this deal was canceled. The risk arb spread was inconceivably wide by February and widened further after that. Ultimately, we chalk it up to the near shutdown of the cannabis capital markets. No new investors have been forthcoming to finance the large asset purchases necessary to get the deal done. A sharp divergence in the market valuation of the two companies was another factor. Based on the original deal terms, Cresco was paying much too high of a premium over the trading value of Columbia Care.
Valuation Gap Analysis
- The Valuation Gap
- The Valuation Gap measures the difference between the EV/ NTM EBITDA multiple for the largest MSOs and the same multiple for the next smaller group. This measure has been a significant driver of M&A activity since a larger gap creates an opportunity for more accretive transactions.
- The companies used in the large-cap index now include Cresco (CL: CSE), Curaleaf (CURA: CSE), Green Thumb (GTII: CSE), TerrAscend (TSND: TSX), Trulieve (TRUL: CSE), and Verano (VRNO: CSE). The small company index now includes Ascend (AAWH: OTCQX), AYR (AYR.A: CSE), Columbia Care (CCHW: CSE), 4Front (FFNT: CSE), Jushi (JUSHF: OTCQX), and Schwazze (SHWX: OTCQX).
- The gap finished the week at 2.73, down from 2.76 at the end of last week. The gap reached a recent peak of 3.55 on April 30 following the DEA announcement. We expect further increases as the market absorbs the S3 news.
