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Marijuana Business Magazine May-June 2020
Marijuana Business Magazine | May-June 2020 84 in taking on a heavily debt-burdened business, Wild said. “Generally, it’s a deal killer if a busi- ness needs to spend a lot of money to get to cash-flow positive. I’d rather pay a little more and buy an asset that is going to be cash-flow positive in the near term and doesn’t need a lot of capital to get there,” he said. Last year, TerrAscend acquired California-based retailer The Apothecarium in a deal worth more than $118 million. Wild said the company is looking to nab other dispensaries on the West Coast to build out The Apothecarium’s footprint. On the East Coast, however, TerrAscend is looking for fully integrated cannabis businesses. In August, the company announced a deal to acquire Ilera Healthcare, one of five vertically integrated cannabis cultivator, processor and dispensary operators in Pennsylvania. DISTRESSED SALES Financial pressures could essentially force less successful or struggling cannabis businesses to seek a buyer to avoid going under. “I think that there’ll be many more distressed types of M&A opportunities popping up. There are so many companies out there starved for cash that some of these companies may have no other option other than to sell themselves at a remotely decent valuation,” Schultz said. In some cases, companies that should be healthy are struggling with external factors that are creating short- or midterm cash problems and shortfalls. For instance, A Drop in Dealmaking Mergers and acquisitions activity in the cannabis industry this year could be limited mainly to companies healthy enough to purchase distressed or struggling businesses that offer the prospect of revenue and expansion opportunities—and the fewest red flags. That narrower focus comes after M&A dealmaking took a hit last year. “We saw a drastic falloff in M&A activity in 2019,” said Scott Greiper, president and founder of New York City- based cannabis investing firm Viridian Capital Advisors. The number of cannabis deals that Viridian tracked through its monitoring of capital raises and M&A activity was down nearly 10% in 2019 versus 2018 on a worldwide basis, Greiper said. Much of the decline occurred in the second half of last year. Deals were down almost 50% in the second half of 2019 versus the second half of 2018, with much of the activity centered in North America. “The most aggressive buyers during the past three years have been public cannabis companies,” Greiper said. “Because declining stock prices hurt their ability to buy companies using stock and also hurt their ability to raise capital, the fires became weakened.” – Adrian D. Garcia BARGAIN HUNTERS Q1 Q2 Q3 Q4 Total 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 0 50 100 150 200 250 300 350 Number of M&A Deals 62 94 111 89 84 71 90 20 325 296 Cannabis M&A: Deals Closed in 2018-2019 Source: Viridian Capital Advisors © 2020 Marijuana Industry Daily, a division of Anne Holland Ventures Inc. All rights reserved.