Since Q3’2019 we have been commenting that the U.S. would become the main target region for cannabis company acquirers. We looked back through the Viridian Cannabis Deal Tracker and here are the numbers -- U.S. cannabis companies accounted for over 90% of M&A consideration in the 2nd half of 2020.
During first quarter of 2019, Canada had the highest share of M&A consideration, but as the year progressed, cracks in the Canadian business model began to become apparent: excess cultivation capacity; scarcity of retail outlets; excessive opex; and revenues that refused to grow as expected.
The change in the trend began to be seen in the 3rd and 4th quarters of 2019 and into the 1st quarter of 2020, where the U.S. dominated the M&A scene, attracting between 59% and 84% of total consideration in each quarter.
2019 had a measurable sprinkling of international deals, attracting between 5% and 20% of consideration. Since the beginning of 2020, however, this international component has disappeared. International deals have accounted for less than 1% of consideration in 2020.
We estimate that the U.S. will continue to drive industry M&A activity in regard to the location of both buyers and sellers.