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2022 Primed after 2021’s Record M&A Deals

NetworkNewsWire Editorial Coverage: Last year was a monumental year for merger and acquisition activity. Records worldwide weren’t just broken, they were smashed by M&A activity reaching a stunning $5.9 trillion, up 64% from 2020 while representing the highest volume since 1980. More than 63,000 M&A transactions were completed as companies found new avenues to growth against the backdrop of a lingering COVID-19 pandemic, rising inflation and disrupted supply chains. The sharpest increase in deal flow came from the United States. which experienced an 82% surge. Companies from all different sectors and industries joined forces to position for continued future success, including diversified CPG wellness company Flora Growth Corp. (NASDAQ: FLGC) (Profile), which recently made a significant acquisition to fuel expansion into the U.S. market. Constant consolidation is rampant involving a wide variety of well-known names, including Microsoft (NASDAQ: MSFT), Activision Blizzard (NASDAQ: ATVI), NVIDIA (NASDAQ: NVDA) and Pfizer Inc. (NYSE: PFE).

  • PriceWaterhouseCoopers expects the momentum for M&A activity to continue into 2022.
  • Flora Growth Corp. added companies with ~$35 million in revenues and ~$7 million EBITDA (per audited financials) through two significant acquisitions in recent months.
  • FLGC’s most recent acquisition generated $28 million in revenue, $7 million in EBITDA in 2020.
  • Flora Growth has raised ~$35 million in capital and added several key executives to fuel its rapid growth.

Megadeals Headline Record Year

A record $5.9 trillion in M&A activity in 2021 may have reflected some pent-up demand from slower activity in the previous three years, catapulting 2021 to easily surpass the previous record set in 2015 of approximately $4.5 trillion. According to professional services firm PriceWaterhouseCoopers’ Deals 2022 Outlook, there were more “megadeals” (transactions of $5-plus billion) in 2021 than ever before and more than 800 deals between $500 million and $5 billion, far exceeding a typical year of 400 to 500. PwC expects the deal-making pattern to continue in 2022 as companies investigate mergers, divestures and other transactions. At a time with high valuations and even higher investor expectations for growth, acquiring revenue is a reliable source of top-line and bottom-line expansion.

Writing the Playbook

Flora Growth Corp. (NASDAQ: FLGC) is not only writing its own playbook on M&A, it’s also coming out the gate fast in 2022, strengthening fundamentals, hiring new key team members and closing another acquisition, one that will immediately add substantial revenue and earnings to the books. Flora Growth’s product portfolio spans a variety of verticals and diverse revenue streams now serving more than 500,000 customers, including but not limited to Tonino Lamborghini, Vessel Brand Inc., Stardog Loungewear, Mambe and Mind Naturals skincare, all goods carefully crafted and targeted for the end consumer. Each brand prioritizes natural ingredients and value-chain sustainability to create products that help consumers restore and thrive. The brands and market verticals (wholesale, CPG, pharmaceutical research, etc.) underscore a strategy of leveraging owned infrastructure and building bespoke brands that gain shelf space with major distributors including Macy’s and Walmart.

Flora Growth’s recent strategic maneuvers continue the momentum from 2021, when the company completed its IPO and closed the acquisition of Vessel Brand Inc., a direct-to-consumer (“DTC”) business that experienced 90% year-over-year revenue growth, in a cash-and-stock deal. Flora Growth also forged a new joint venture late in 2021 to distribute award-winning KaLaya brand through Latin American markets and closed an oversubscribed public offering that added $34.5 million to the coffers to keep on executing. The company has a pristine balance sheet with minimal debt complemented by a large cash balance.

Capturing US Market Share

This week, Flora Growth entered the U.S. market in a major way with its most recent acquisition, a category-leading wellness brand for $16 million in cash and 9.5 million shares of FLGC common stock. The newly acquired company generated audited revenues of $28 million in 2020 along with $7 million in earnings before interest, taxes, depreciation and amortization (EBITDA).

Benefits abound in this acquisition. Founded in 2017, the company rapidly ascended in the consumer-packaged goods (“CPG”) wellness space with its portfolio of more than 300 branded products and omni-channel approach that includes an extensive network of over 14,000 retail locations.

Flora Growth will also retain key leadership from the acquisition, including Hussein Rakine, who was named to Forbes’ 2022 list of 30 Under 30 list for retail and ecommerce. There’s lots of new talent around Flora Growth lately as it grows in leaps and bounds, including a recently appointed chief strategy officer, chief marketing officer, SVP of global operations and a newly formed advisory board.

If One Is Good, Two Is Better

In November, Flora Growth completed the acquisition of Vessel Brand Inc. for aggregate consideration consisting of a combination of cash and the issuance of Flora common shares. Formed in 2018, Vessel’s go-to-market strategy for DTC sales in the U.S. and internationally has been paying off, reaching $6.6 million trailing 12-month revenue ahead of the acquisition, up by 90% from the comparable period a year earlier.

With consideration for the Vessel acquisition, Flora Growth said in December that it anticipates revenue in the range of $35–$45 million for 2022. However, those numbers did not reflect FLGC’s most recent acquisition. The full extent of the synergies won’t be known until the integration is complete, but management expects revenue to be amplified as operations and teams are merged. To that end, investors will be eagerly on the lookout for any revisions to guidance when the company next releases its quarterly and full year 2021 results, which could easily serve as another market catalyst.

Want Fast Growth? M&A Is the Answer

If the global pandemic, social unrest, cyberattacks and extreme weather events have taught companies anything, it should be to protect yjrot supply chain as best as possible and look to achieve self-sufficiency in products and services. This is increasingly possible through a number of practices, including reshoring, nearshoring or M&A by vertically integrating upstream links to improve certainty of delivery.

Microsoft (NASDAQ: MSFT) said on Jan. 18, 2022, that it has agreed to terms to acquire Activision Blizzard for $95 per share in an all-cash deal valued at $68.7 billion, inclusive of Activision Blizzard’s net cash. Microsoft recognizes that three billion people actively play games today and, fueled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment. The acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse. When the transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony.

Activision Blizzard (NASDAQ: ATVI) is the owner of iconic franchises such as “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming. Through the Microsoft acquisition, CEO Bobby Kotick sees the opportunity to leverage Microsoft’s scale and resources to better grow the company’s existing franchises and unlock the library of games that its family of companies has assembled over the last 40 years. For the year ended Dec. 31, 2021, Activision Blizzard reported GAAP revenue of $8.8 billion, up from $8.09 billion in 2020.

NVIDIA (NASDAQ: NVDA) announced in January that Bright Computing, a leader in software for managing high performance computing systems used by more than 700 organizations worldwide, had become part of NVIDIA. The announcement noted that companies in healthcare, financial services, manufacturing and other markets use Bright Computing’s tool to set up and run HPC clusters, groups of servers linked by high-speed networks into a single unit. According to the announcement, the company’s product, Bright Cluster Manager, became the latest addition to NVIDIA’s software stack for accelerated computing.

Pfizer Inc. (NYSE: PFE) announced late last year that it had entered into a definitive agreement with Arena Pharmaceuticals Inc. under which Pfizer will acquire Arena, a clinical-stage company developing innovative potential therapies for the treatment of several immuno-inflammatory diseases. Under the terms of the agreement, Pfizer will acquire all the outstanding shares of Arena for $100 per share in an all-cash transaction for a total equity value of approximately $6.7 billion. The boards of directors of both companies have unanimously approved the transaction.

Anyone that is a fan of M&A activity enjoyed a whirlwind year in 2021. Lucky for them, there could be a repeat in 2022.

For more information about Flora Growth Corp. (NASDAQ: FLGC), please visit Flora Growth Corp. (NASDAQ: FLGC).

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