Greenfield and Brownfield Investments

Question

Hi!

I have a few questions about Greenfield and Brownfield investments and how to think about them. My understanding is that Greenfield investments are when a company builds facilities from the ground up in a foreign country while Brownfield investments are when companies build off of existing facilities, such as an existing business.

My follow-up questions are:

Is Greenfield considered organic expansion and Brownfield considered inorganic?
If so, does Brownfield encompass M&A? Or is it more closely related to partnerships/joint ventures?
Are Greenfield/Brownfield only applicable to international expansion?
Are these terms only applicable to the development of land/property or can they be applied to business development as well (i.e. expanding product offerings to new markets)?

Any insights would be appreciated, thank you!

Answer 1

Good questions! Let me put my answers below.

1. They can both be organic or inorganic - depends on the context. As an example: if I upgrade my existing factory in order to manufacture a new product: that is an organic, brownfield investment. If I buy another company so that I can access and upgrade their factories: that is an inorganic brownfield investment. Greenfield vs. brownfield is determined by whether the facility is brand new, or whether it’s been upgraded. Inorganic vs. organic is whether M&A is involved. You can’t fully conflate the two.

2. See above. Greenfield vs. brownfield is purely about whether you’re building a new facility or upgrading / changing an existing one. It’s not about whether M&A or partnerships are involved.

3. No - I could develop or build a greenfield site in my domestic/home market

4. It’s mostly about land/property/facilities/O&G or mining leases. I’ve never heard it used to describe product expansion in any other context.

Hope this helps!

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