MERGERS & ACQUISITIONS
Transactional Activity: Week 36 saw 5 M&A transactions, unchanged from the number in the prior-year period. Although the number of M&A transactions completed year-to-date is down 77% vs the comparable period of 2019, we continue to expect increased activity in the remainder of the year.
Largest M&A Transaction: On September 1st, Columbia Care Inc, a New York-based MSO with licenses in 18 U.S. jurisdictions, purchased The Green Solution (“TGS”), the largest vertically integrated cannabis operator in Colorado, for a total consideration of approximately US$133.5 million consisting of $110 million in stock and the remainder in a combination of secured notes and seller notes. TGS is expected to have 2020 revenues of approximately US$88.5 million and 2020 EBITDA of $18.5 million. The purchase price multiples of 1.5x revenues and 7.2x EBITDA are attractive relative to the median values of 2.7x revenues and 23.2x EBITDA for the 17 U.S. Cultivation & Retailing companies we track with enterprise values over $100 million. The transaction vaults Columbia Care into the number one position in Colorado, the 2nd largest cannabis market, and aides achievement of the company’s goal to become EBITDA positive by the third quarter of 2020.
Public vs. Private: 4 of this week’s 5 acquisitions were made by public companies. Year-to-date, 92% of M&A transactions closed in 2020 have been made by public companies (up from 71% in 2019). Public companies, particularly with the recovery in stock prices and fundraising ability, have been the dominant acquirers in the cannabis industry. Private companies remain the dominant targets for acquirers.
M&A by Sector: 3 of this week’s buyers came from the Cultivation & Retail sector, 1 from the Investment/M&A sector, and 1 from the Consumption Devices sector.
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