Cannabis Market 2021: US Marijuana Companies Dominate Deal Volume, Raising Capital Faster Than Canadians

The graph displays the volume of capital raises and number of acquisitions Canadian and U.S. companies have completed from 2018-2021 YTD.

The bars on the graph represent the amount of capital Canadian (blue bar) and U.S. (green bar) companies have raised each year since 2018. Canadian companies raised $4.9B in 2018, representing 3.9x the $1.2B that their U.S. counterparts raised. But over the past few years there has been a major changing of the guard, So far in 2021, U.S. companies have raised $5.6B, approximately 1.8x their Canadian counterparts.. U.S. companies have raised more money in the first 8 months of 2021 than in any full year since the Viridian Cannabis Deal Tracker began. Why?

• • The early capital constraints on U.S. companies have proven a long-term advantage, as sparce capital needed to be more carefully deployed. The U.S. MSOs have achieved strong revenue growth and positive EBITDA as they expand operations in newly legalized states. Institutional capital has been attracted by this profitable growth and funding levels have been significantly bolstered.

  • Significant early capital deployment by the large Canadian LP’s was poorly conceived, and the “build it and they will come” mentality led to billons of write-offs as excess capacity was rationalized. 

• The lines on the graph represent the number of acquisitions made by Canadian (light blue line) and U.S. (light green line) companies from 2018 – 2021 YTD. Canadian companies acquired nearly 211 companies in 2018, representing 2x the 103 acquisitions made by U.S. operators. The difference in acquisitions between Canadian and U.S. companies continued to tighten over the next two years, and YTD in 2021 YTD U.S. operators acquired 122 companies, 1.4x their Canadian counterparts. Why?

  • Large US MSOs have driven the pace, making use of their significant valuation multiple premiums over their smaller targets.  

  • Acquisitions of U.S. companies will continue as balance sheets are fortified with cash, and accretive transactions are available.

  • Canadian companies are increasingly looking to enter the U.S. market.

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 is a proprietary information service that monitors capital raise and M&A activity in the legal cannabis and hemp industry. Each week the Tracker aggregates and analyzed all closed deals and segments each according to key metrics:

• Industry Sector (one of 12 sectors, from Cultivation to Brands)

• Dollar value of the transaction

• Region in which the deal occurred (country or U.S. state)

• Status of the company announcing the transaction (Public vs. Private)

• Deal structure (equity vs. debt)

• Key deal terms (Pricing and Valuation)

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.

 Since its inception in 2015, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,500 capital raises and 1,000 M&A transactions totaling over $50 billion in aggregate value.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Más contenido sobre cannabis en Español en El Planteo.