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As the cannabis industry adapts to its new regulatory environment following the DEA’s announcement it would move to reschedule cannabis, a recent report from Viridian Capital Advisors suggests a significant uptick in mergers and acquisitions (M&A) activity is on the horizon.
Increased Benefits For Tier 1 Mult-State Operators
The analysis highlights a crucial trend in the valuation gap between Tier 1 multi-state operators (MSOs) and smaller entities, which has widened to a three-year high.
Ordered by market capitalization, tier 1 MSOs include Curaleaf Holdings CURLF at $4.15 billion, Green Thumb Industries GTBIF at $2.98 billion, Trulieve Cannabis TCNNF at $2.10 billion, and Cresco Labs CRLBF at $718.51 million, among others.
This disparity means that M&A has become increasingly accretive for larger companies. In simpler terms, larger companies can now achieve more growth through acquisitions than before, as they can purchase other companies at relatively lower prices compared to their market value.
Capital Cost Dynamics Alter Bargaining Power
The report also indicates a growing differential in the cost of capital, which is beginning to favor the larger, publicly traded Tier 1 MSOs.
This means these companies now face lower costs when raising funds compared to their smaller, often privately-held, counterparts. This financial leverage shifts the bargaining power significantly towards the
