The Greenfield and Brownfield approaches are variants of the income approach used to value intangible assets by modelling how a hypothetical market participant would build (or rebuild) cash flows. The Greenfield approach assumes the acquirer starts with nothing — no customers, no workforce, no brand — and must build the business from scratch. The Brownfield approach assumes the acquirer starts with some existing assets in place. The difference in the resulting cash flow ramp-up is attributed to the intangible asset being valued.
Valuation Method
Greenfield vs Brownfield Valuation Approach
Greenfield vs Brownfield valuation approaches for intangible assets. How starting from zero versus starting with existing assets changes the valuation outcome.
| Criteria | Greenfield Approach | Brownfield Approach |
|---|---|---|
| Starting assumption | Business starts with zero assets — only the intangible being valued and cash | Business starts with some existing assets (e.g., workforce, technology) but lacks the target intangible |
| Cash flow pattern | Extended ramp-up period from zero to stabilised earnings | Shorter ramp-up — some revenue-generating capability already exists |
| Typical application | Broadcast licences, spectrum rights, franchise agreements, mining rights | Customer relationships, assembled workforce, non-compete agreements |
| Complexity | Very high — must model entire business build-out timeline | High — must determine which assets are 'in place' versus being valued |
| Comparability to With-and-Without | Similar in concept to the 'without' scenario in W&W method | More granular — allows selective asset inclusion |
| Regulatory guidance | AICPA Practice Aid supports for assets that enable a business from scratch | Used when the 'from scratch' assumption is too extreme |
When to Use Each Approach
Greenfield Approach
- Valuing an asset that enables the entire business to operate (e.g., a broadcast licence)
- Spectrum or mining rights where the asset is the starting point for all operations
- Franchise agreements that grant the right to operate in a market
- When the asset being valued is the foundation upon which everything else is built
Brownfield Approach
- Customer relationships where the business has technology and workforce in place
- Non-compete agreements where the question is lost revenue from competition
- Assembled workforce when the business retains all other assets
- When the pure greenfield assumption is unrealistic for the asset in question
Our Verdict
Use the Greenfield approach for foundational assets (licences, spectrum, franchise rights) where the asset enables the entire business from nothing. Use the Brownfield approach for assets like customer relationships where other business infrastructure already exists. The choice significantly affects the ramp-up period and therefore the present value of attributed cash flows.
Related Glossary Terms
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