Viridian Chart Of The Week: Tracking The Rotation Of M&A Transactions By U.S. State

The Viridian Capital Advisors Regional Tracker provides actionable intelligence to investors and companies on the flow of capital raises and M&A activity by region. The graph shows the top ten state targets for M&A for the trailing twelve months ended 8/19/21 (green bars) compared to those same states in the prior year period (brown bars).

• U.S. targeted cannabis M&A consideration was down 11.0% for the LTM ended 8/19/22 to $6.35B from $7.14B in the prior year. The number of transactions was down 20.5%, from 171 in the LTM ended 8/19/22 compared to 136 in the previous year.

• M&A activity has accelerated in newer adult-use Eastern States, including New York, Massachusetts, Connecticut, and New Jersey, while remaining relatively high in more mature states, including California and Colorado. Several formerly top-ten states no longer appear on the chart:  Florida (#13 down from #3),  Georgia (#24 down from #6), and Maryland (#15 down from #7). Meanwhile, Michigan (#12) and Illinois (#14) have gained enormously, up 142% and 64%, respectively but remain just below the chart threshold.

• Although M&A activity is down for the LTM, it is more broadly based. In the most recent period, 14 states had consideration totals over $75M compared to 9 in the previous LTM. The top five states accounted for 68% of the consideration in the current period compared to 79% in the prior period.

• The biggest surprise on the chart is the # 1 position of Arizona, where total consideration rose 398% from $347M to $1.73B. This ascension is primarily due to the October 2021 $1.41B purchase of Harvest Health & Recreation by Trulieve CSE. This transaction was more than three times the size of any other deal in the current LTM period; the U.S. total would be down by 31%, and Arizona would drop to #4 on the list without it. Still, Arizona is seeing a brisk consolidation activity, and we expect additional significant transactions in the remainder of 2022.

• New York rose to #2 in the LTM period from #11 previously primarily due to the $247M acquisition of RO Etain, LLC by RIV Capital CSE and the reverse mergers of Merida Merger Corp I into Leafly Holdings (LFLY: Nasdaq) for $444M and Tuatara Capital Acq Corp into SpringBig Inc. (SPIG: Nasdaq) for $156M. We expect significant M&A activity in the 4th quarter as mandated divestitures from the Cresco / Columbia Care merger occur.

• California was the biggest decliner, dropping 78% from $3.06B a year ago to $682M in the current LTM. Part of this decline is attributable to the prior LTM’s $1.43B, June 2021 SPAC acquisition of WeedMaps (MAPS: Nasdaq); however, the number of transactions is also off sharply, down 40% from 48 in the prior period to 29 in the current LTM. The virtual freefall the industry has experienced over the last year has given prospective acquirers pause. Over the next six months, we expect to see a strong upswing in distressed M&A.

• As companies turn to M&A to fill out their operations, investors should keep an eye on regional changes in M&A flows.

The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from the Viridian Cannabis Deal Tracker.

The Viridian Cannabis Deal Tracker provides the market intelligence that cannabis companies, investors, and acquirers utilize to make informed decisions regarding capital allocation and M&A strategy. The Deal Tracker is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis, CBD, and psychedelics industries. Each week the Tracker aggregates and analyzes all closed deals and segments each according to key metrics:

• Deals by Industry Sector (To track the flow of capital and M&A Deals by one of 12 Sectors - from Cultivation to Brands to Software)

• Deal Structure (Equity/Debt for Capital Raises, Cash/Stock/Earnout for M&A) Status of the company announcing the transaction (Public vs. Private)

• Principals to 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 Location of Issuer/Buyer/Seller (To Track the Flow of Capital and M&A Deals by State and Country)

• Credit Ratings (Leverage and Liquidity Ratios)