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.