Cannabis Deals And M&A Picking Up Steam Again

The Viridian Cannabis Deal Tracker is an information service that monitors capital raise and M&A activity in the legal cannabis industry. Analyzing within 12 key industry sectors, the Viridian Cannabis Deal Tracker provides cannabis companies, investors, and acquirers with the data, trends, and intelligence they need to make informed decisions regarding deal valuations, terms, and structures. Since its inception, the Viridian Cannabis Deal Tracker has tracked and analyzed more than 2,400 capital raises totaling over $29 billion as well as more than 800 M&A transactions. Find it exclusively on Benzinga Cannabis every week!

INVESTMENT AND M&A ACTIVITY IN THE CANNABIS INDUSTRY FOR 9/9/2019 TO 9/13/2019

CAPITAL RAISES

• Sixteen raises closed this past week, totaling nearly $267 million and outpacing the 12 deals totaling just over $73 million from the same week last year. While there were more deals closed this week compared to the prior-year period, the significantly greater aggregate capital raised led to an average deal size more than two and a half times greater ($16.1 million vs. $6.1 million). While we have seen some weakness in the cannabis capital markets in 2019, these large raise amounts point to continued investor interest in the sector.

• Of the sixteen raises, eleven used equity structures. However, again this week, the largest raise closed used a debt structure. We continue to see the largest operators, particularly those in the Cultivation & Retail sector with large asset bases, able to raise large sums by issuing debt.

• This week, the sixteen capital raise transactions were split evenly between "touching the plant" and ancillary businesses, pointing to continued broad capital markets activity in the cannabis industry.

MERGERS & ACQUISITIONS

• We tracked six closed M&A transactions this past week, a count far fewer than the ten closed this week last year.

• All of the closed transactions, aside from the reverse takeover, involved private companies as the targets. This week, however, not all the buyers were public as we have seen in prior periods.

• We continue to see acquisitions of non-cannabis-related businesses by those in the cannabis sector. This week, an infused products company, Bhang, bought a non-cannabis organic nutritional beverage business, Red Ace, and a European medical cannabis business, Cannaray, purchased a non-cannabis drug distributor and importer, Therismos. We expect to see more acquisitions like these as cannabis companies look to capture valuable assets, technologies, or synergies from outside of the industry.

• United States operators continue to utilize reverse takeovers to list on Canadian public exchanges. We expect this to persist until the U.S.-domiciled exchanges change their stance on listing companies with U.S. cannabis operations, a shift that may require a change in U.S. federal policy before being effectuated.