Total US targeted cannabis M&A is down 73.6% from $10.2B for the last twelve months ended 1/27/22 for LTM, $2.7B for LTM ended 1/27/23. The first four weeks of 2023 are down even more sharply, down about 98% from the same period in 2022.
Two opposite trends are pulling on US M&A volumes:
- Focusing on cash flow rather than layoffs and growth. As shown by AYR AYRWF canceling its $55M dispensary purchase in Chicago this week and Curaleaf’s curlf Exit three western states. Cresco crlbf/ Columbia Care CCHWF The megadeal hangs in the balance, with arb spreads saying the deal is likely to be canceled or renegotiated.
- Distressed Asset Sales: Record Tightness in the Cannabis Capital Markets. Ongoing pricing compression and inflationary margin pressure are pushing small to mid-sized companies into a liquidity crunch, increasing distressed M&A opportunities for the right buyers.
A tighter operating and financing environment would be healthy for the industry, weeding out those unable to respond to challenges and strengthening those who took the opportunity to improve their cash-generating capacity.
This will provide a once-in-a-lifetime opportunity for investors/companies/acquirers who can identify deep value and collect distressed assets at heavily discounted prices.
There has also been a significant change in the state-to-state composition of transaction volumes.
- No state accounted for amounts above $500 million in this year’s LTM period. In contrast, 4 states had higher totals last year: CA ($3.1B), CO ($991M), PA ($919M), and FL ($780M).
Last year’s LTM M&A volume in California (whose $3.1B total is highlighted by the light green part of the graph) was higher than all 50 states combined this year.
Washington was the top state in total transaction volume this year due to the $444M Merida Merger Corp. SPAC deal for Leafly LFLY In February 2022.
72% of the New York total was made up of the $247M acquisition of Etain LLC in April 2022 by RIV Capital.
Nevada conducted eight transactions in the LTM, led by Curalleaf’s $181 million acquisition of Trike Corp.
Viridian Capital’s Chart of the Week highlights key investments, valuations and M&A trends taken from the Viridian Cannabis Deal Tracker.
Viridian Cannabis Deal Tracker Provides market intelligence used by cannabis companies, investors and acquirers to make informed decisions regarding capital allocation and M&A strategy. Deal Tracker is a proprietary information service that monitors capital raising and M&A activity in the legal cannabis, CBD and psychedelics industries. Each week the tracker aggregates and analyzes all closed deals and volumes according to key metrics:
Deals by Industry Sector (to track capital flows and M&A deals by one of 12 sectors – from agriculture to brands to software)
Structure of the deal (equity/debt for capital increase, cash/stock/earnout for M&A) Status of the company announcing the transaction (public vs private)
Principals of the Transaction (Issuer/Investor/Lender/Acquirer) Key Deal Terms (Pricing and Valuation)
Key deal terms (deal size, valuation, pricing, warrants, cost of capital)
Deals by issuer/buyer/seller location (to track capital flows and M&A deals by state and country)
Credit Rating (Leverage and Liquidity Ratios)
Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed over 2,500 capital raising and 1,000 M&A transactions, totaling more than $50 billion in value.