Understanding Greenfield investment

Greenfield is a type of private equity investment (/en/blog/quest-ce-que-le-private-equity-pe) in which the investor provides the capital to create an entirely new company from scratch. Unlike an acquisition, Greenfield does not involve the purchase of an existing business, but rather the creation of an entirely new one. The term Greenfield refers to a "green field" or a situation from scratch, as it is generally used to describe a situation where an investor does not have to consider existing infrastructure, processes or employees.

Greenfield is often used to describe a high-potential investment model, as capital and planning and preparation efforts present a competitive advantage. Greenfield investments are generally more expensive than acquisitions, as they require significant investment in the development, construction and launch of a complete new infrastructure. But once in place, they offer the advantage of a new business, which can make them a better form of long-term investment.

Greenfield is a large part of the private investment sector, and can be found in almost every industry. It is commonly seen where sufficiently large investments are required to create and launch a business. Examples of Greenfield include the development and management of real estate complexes, the operation of new mines and factories, and the establishment of new technology companies.