Analysis by Ruud van der Vliet

Private equity is inextricably linked with Dutch greenhouse horticulture

Private equity is an integral part of the business world, and therefore also of greenhouse horticulture. In fact, private equity is the basic financing of every company. Private equity transactions have received a lot of attention in the media in recent years. A relatively large number of transactions are taking place. Many investors are looking for (higher) returns. Partly for this reason, private equity is a much-used alternative or supplement for companies to bank financing. In the story below, which appeared earlier in the March edition of the trade journal Primeur, Ruud van der Vliet provides his analysis.

Investment companies are actively involved in the long-term development of the company as shareholders. Banks mainly look at historical figures and whether the company meets the conditions and covenants of the financing. This is often retrospective and reactive. For this reason, private equity is also called 'smart' money and bank financing 'dumb' money.

The increased interest of private equity in greenhouse horticulture is very logical, given the expected growth in the area of high-tech greenhouses as a result of the growing demand for sustainably produced fresh fruit and vegetables all year round. Necessary increases in scale and internationalization of greenhouse horticulture call for greater professionalization and financial strength. Private equity can make a positive contribution. However, the success of the cooperation between the company and the investment company depends on a shared vision, the right structure, and capable people.

Increased interest in private equity
The reasons for the increased interest in private equity for Dutch greenhouse horticulture are obvious. The production of fresh food is most sustainable in high-tech greenhouses. The demand for year-round locally and sustainably produced fresh fruit and vegetables of stable high quality is rapidly increasing worldwide. For various reasons, the knowledge, experience, and technology of (growing in) high-tech greenhouses have traditionally been concentrated in the Netherlands.

Worldwide, considerable growth in the area of high-tech greenhouses is expected. Various banks and research institutes expect the area under high-tech greenhouses worldwide to grow from roughly 50,000 ha today to over 100,000 ha in 2030. The majority of the increase in the area will be for the production of fruit and vegetables and a minority for ornamental horticulture. The expected new build of high-tech greenhouses far exceeds the current building capacity of the well-known greenhouse builders. This demands an increase in scale and professionalism from greenhouse builders and their suppliers. We predict this will happen.

Production in high-tech greenhouses appears to be the most sustainable way of growing fresh fruit and vegetables in most climate zones. This was recently confirmed in a WUR study commissioned by Grodan. And more sustainable than organic, too. High-tech greenhouses can therefore form an interesting part of the solution for the global food problem. Investors and retailers see this too. An important challenge, however, is the often low margin for the grower/producer of fresh fruit and vegetables. The power, especially in fresh food, lies at the beginning of the chain (with the seed companies and breeders) and at the end (with the supermarkets). Everyone in between is squeezed. Only good growers/producers with the right high-tech greenhouses, with the right yield per square metre, who can deliver all year round, who can unburden the retailer and who have a good and sustainable product, really make good returns. In practice, this requires an increase in scale, more automation, robotization, digitalization and, above all, professionalization. Chains are rapidly becoming shorter and intermediate links, which add little value, are being cut away. Whereas until recently the grower/producer himself was the client of the greenhouse builder, nowadays more and more investors and retailers are setting up large-scale projects.

Green Deal is less sustainable
The Green Deal of the European Commission (EC) turns out to be much less sustainable than expected. Insiders have known this for a long time and the aforementioned study by WUR confirms it. Everyone understands that something has to be done about climate change. It is debatable whether the solution lies in the production of food. After all, in Europe we produce very sustainably. With Dutch knowledge, technology and experience, we can make an important contribution to a sustainable food supply. Dutch greenhouse horticulture is an excellent example of this. The EC wants to halve the use of crop protection products by 2030. According to European plans, the use of artificial fertilizers must also be reduced. This was calculated by researchers from WUR in a study commissioned by CropLife Europe and CropLife International, in which other stakeholders in the food chain were also involved. In this study, the researchers focused on the impact of the farm-to-fork strategy and the biodiversity strategy, both part of the Green Deal.

Important conclusions from this study are that because of the Green Deal much more food has to be imported, less can be exported, more land is needed, the EU will become less self-sufficient and ultimately this solution is, on balance, much less sustainable. Apart from the recent geopolitical tensions and the urge of many EU countries to become more self-sufficient.

Power in the chain
Economies of scale and professionalization are also desperately needed on the production side. Supermarkets have a lot of power in the fresh produce chain. In the EU, there are only ten purchasing organizations active on behalf of supermarkets. These purchasing organisations have a great deal of purchasing power and are therefore extremely powerful, especially when it comes to fresh food. For years, research has been carried out into the possible unfair balance of power between farmers, horticulturalists and the purchasing organizations in question. However, "insultingly low prices" were not punishable according to the EU competition authorities because they were in the "interests of consumers". According to the regulations, therefore, abuse by purchasing organizations was not a matter of competition law. Fortunately, after long negotiations within the EU, an EU directive against unfair commercial practices has finally been adopted and will be implemented by the Member States this year. We see that for example, Mastronardi in North America is a major player with a direct line to retail. Besides being a grower, Mastronardi is also a packer, marketer, seller and distributor. In North America Mastronardi manages almost 2000 ha of mid and high tech greenhouses for the production of vegetables and soft fruit. With this acreage and position in the chain, Mastronardi is not interchangeable with supermarkets. It helps that the US has more than 100 national and regional supermarket chains. In Europe we see that the scale of greenhouse horticulture is increasing rapidly. Agro Care, the largest tomato grower in high-tech greenhouses in Europe, has expressed the ambition to grow from the current 261 ha to 1,000 ha by 2030, with the help of investor NPM Capital. The demand for local, sustainable and year-round produced fresh food will further increase. Many countries wish to become more self-sufficient, not in the least because of recent geopolitical tensions. The position of the grower/producer in the chain will be improved by regulations and further scale-up and professionalization of growers/producers. Jelte van Kammen, CEO of Harvest House, recently indicated that for this reason there is actually only room for two grower organizations in the Netherlands. It is just a matter of time before the next wave of mergers of growers/producers will occur. This then also applies to the propagators (growers of starting material) and the other suppliers. I expect the interest of private equity in large (potentially) successful growers/producers and propagators in high-tech greenhouses to increase further. Agro Care is the first, but certainly not the last!

There has always been private equity
The literal meaning of private equity is private capital. These are investors who finance companies outside of the stock market. In fact, private equity is the basis of every company. A listed company can issue extra shares on the stock exchange if it needs money, an unlisted company cannot do that. In the Netherlands, less than 100 of the rounded 500,000 SMEs (excluding 1.4 million freelancers) are listed on the stock exchange. If a non-listed company needs money, it has three options: bank financing, private investors and/or raising money through a SPAC.

On 7 March 2022, the FD reported that private equity deals worldwide had reached a record high in 2021. The total value was no less than 1,100 billion US dollars. Approximately the GDP of the Netherlands in 2020, but less than half of the current stock market value of Apple. Everything turns out to be relative. The reason for this record high is mainly the persistently low-interest rate; investors are looking for yield!

According to the CBS, in 2021 roughly 8 billion euros in private equity and venture capital will have been invested in Dutch companies. To put this into perspective, more than 11 billion euros in factoring and leasing contracts and more than 100 billion euros in bank financing will have been provided to companies in the Netherlands in 2021. The impact of Credit Unions, crowdfunding, SME Stock Exchange and other alternative forms of financing remained limited to less than 1 billion euros in 2021.

Based on the above numbers, most companies are often initially financed by private equity (mainly family and friends) and subsequently mainly by bank financing.

Private equity has many forms and shapes
Private equity financing exists in various forms, including the purchase of shares and the provision of venture capital, growth capital and mezzanine capital, for start-ups, growing companies and established companies. But also for facilitating an MBI and MBO.

In many cases, private equity financing is provided by investment companies that are composed of groups of investors who have pooled their money to make certain types of investments. The aim is to provide capital to start-ups, established and growing companies.

Private investors are often family and friends at the start of a business. More professional investment companies/private equity firms specialize. The capital to be invested often comes from pension funds, insurance companies, banks, wealthy families and/or private investors. The three major Dutch banks also have their 'own' investment companies. These companies invest that capital in non-listed companies. When these companies have sold their shareholdings after 6-10 years at a profit, they pay back their deposit and return to the investors. The sale of the equity stake is done through financial sale, strategic sale or an initial public offering (IPO). Ultimately, the investment company looks mainly at the return to be achieved. Of course, that return is not fixed in advance.

Seed Capital is the name for capital with which a start-up finances its first business activities. It is the first money that is put into a start-up or young company. The risks and potential returns are very high. Sometimes you need more rounds of Seed Capital to reach the next stage. An investment in a young existing company is called Venture Capital. This is investing in a company with a nice innovation or market position with still a lot of risk, but also with potentially high returns.

The strategy of the private equity company is very important for a successful cooperation; for example, is an interim dividend paid, is leverage used, does the company have specific (sector) knowledge and network, is extra capital injected for growth or acquisitions, is a director or supervisory director added and/or is leverage used.

Private equity companies sometimes buy companies with leveraged financing or Leveraged Buy-out (LBO). LBOs are financed by debt. These transactions often mean that the assets of the companies being bought, together with those of the companies making the purchase, will be used as collateral. In practice, this regularly leads to extremely high interest charges, which 'strips' the company financially.

Meanwhile, we also see more attention for SPACs. In the US alone, over 600 SPACs went public in 2021. A SPAC (Special Purpose Acquisition Company) is a company without business activities that goes public to raise capital in order to buy (part of) an unlisted company in the relatively short term. Because SPACs do not know in advance which company they are going to acquire and have no business activities when they go public, they are also called ‛empty stockholders' or ‛blank cheque companies'. There are currently 17 SPACs listed on the AEX, three of which seem to have found a merger partner. Among others, AppHarvest owes its listing to a SPAC.

Difference between smart and dumb money
Bank financing is sometimes seen as ‛dumb' or ‛reactive'. The reason is that a bank uses a more or less standardised risk model to assess a financing request, resulting in a risk classification with corresponding conditions, securities and rates. If the risk is deemed acceptable by the bank, the application is granted. The more risky the bank assesses the financing, the higher the rate. Nevertheless, the interest charges on bank financing are relatively low. Subsequently, after granting, information is exchanged periodically and it is assessed whether the company complies with the covenants and other conditions. This is almost always after the fact and there is little or no value or knowledge added by the bank. Hence the terms ‛dumb' or ‛reactive'. Strangely enough, in a situation where a company no longer complies with the covenants or conditions, the bank adds more expertise from the special or intensive management activities. Often, in retrospect, such a period is experienced as very positive by the management of the company concerned, because during that period they worked together on a solution.

With private equity, the optimal situation is referred to as ‛smart' or ‛proactive' money. In almost all cases, the investment company will draw up a multi-year plan with the management of the company and, based on this, make (additional) capital and resources available. From the multi-year plan an annual budget is drawn up which is intensively discussed with the investment company. Often an expert director or commissioner from the investment company is added. An investment company will often hold monthly soundings with the management of the company to support them in realizing the long-range plan, with (sector) knowledge, network, ideas and/or acquisitions. The operation is and remains in the hands of the management of the company.

Capital contributed by private equity is considered as equity and is risky. The return expected by the investment company is therefore considerably higher than bank financing. However, by working much more proactively with the management of the company, private equity often knows much better how the company operates.

Private equity is therefore an excellent alternative or supplement to bank financing. The success of the cooperation is strongly dependent on the strategy, specific (sector) knowledge and network of the investment company, the well-founded and supported long-term plan of the management of the company in which the company is participating, and the expected risk and return. Investment companies almost always take a majority or large minority stake in a company. They often also stipulate control over the strategy and financing structure, for example. These companies are often specialised: for example, in young or mature companies, internationally or regionally and/or in specific sectors.

Recent transactions in greenhouse horticulture
Private equity is nothing new in Dutch greenhouse horticulture. Some people think so, but the facts show a different picture. In recent years, however, transactions have been more widely reported in the media. Below is a non-exhaustive list of recent transactions.

In the past few months the Nasdaq-listed Canadian Agriforce Growing Systems has made a name for itself by first taking over the Dutch Delphy Group and then the Belgian Deroose Plants. Agriforce focuses on the development and application of knowledge for sustainable growing techniques and with Delphy they expect to accelerate this strategy. Deroose is specialized in tissue culture propagation and this takeover also fits in with this strategy.

If we go back in time, we see that in 2015 floriculture breeder Dümmen Orange was sold on by the Dutch investment company H2 and the Dümmen family to the English investment fund BC Partners.

Investment company KKR, which in 2014 acquired a majority stake for $200 million in Dutch horticulture company Afriflora, the world's largest rose company with 650 ha of low- and mid-tech greenhouses in Africa, sold its majority stake to Sun European Partners in 2018. The Barnhoorn family, the founders of Afriflora, retained a minority stake in the flower company.

Pokon Naturado, known for its nutrition and potting soil for plants, was acquired in 2018 by British industry peer Evergreen Garden Care, owned by investment company Exponent. Incidentally, Pokon had been owned by another investment company, Veenendaal-based Synergia Capital Partners, since 2007. Synergia took over the company from flower food company Chrysal and then merged it with Pokon and potting soil manufacturer Naturado.

Codema Systems Group, active as a complete supplier to greenhouse horticulture, was sold in 2018 by founder Maarten de Jager to Nordian Acquisition and the board.

In 2018, investor Equistone purchased the Boal Group. Boal is a key supplier of greenhouse cover systems for most greenhouse builders and has significantly expanded its product range through the recent acquisition of Alumat Zeeman.

VP Exploitatie, the investment arm of the van Puijenbroek family, delisted Batenburg Group in 2019, including the companies Hoogendoorn and Let's Grow, which are well-known in greenhouse horticulture. This family is best known as former owners of the Telegraaf Media Group.

This was rapidly followed by participations in greenhouse builders such as Van der Hoeven/Patron by the Belgian Arvesta, in Prins/Stolze by HAL, in Kubo by NPM Capital, in Certhon by the Japanese Denso, Gakon by Netafim and Van Dalsem by Cofra. Atrium Agri forms its own group with ING and Rabo as financiers to implement ambitious growth plans.

Recently the German billion-dollar concern Big Dutchman announced that it had taken a minority stake in Ammerlaan in Venlo. In fact, all larger Dutch greenhouse builders are now (partly) owned by investment companies.

Also noteworthy was NPM Capital's minority stake in Agro Care in 2020. Agro Care is the largest year-round producer of tomatoes in high-tech greenhouses in Europe, with 260 hectares of cultivation area spread across the Netherlands, France, Morocco and Tunisia. In addition to growing tomatoes, Agro Care is also active in breeding, packaging, marketing and distributing tomatoes through its subsidiaries.

The area of high-tech greenhouse horticulture is expected to continue to grow substantially and with it the need for labour. However, the number of (seasonal) workers is not increasing at the same rate. Automation, robotization and digitalization reduce the need for labour and increase the quality of greenhouse horticulture. That is why food and agriculture specialist ADM Capital and its Cibus Fund recently participated in ISO Group, Rabo Investments in Havatec, Synergia in Viscon, and the German multi-billion Viessmann group in Priva. Smaller investment companies such as Kind Techologies and Victus recently acquired stakes in relatively small logistics automation companies in greenhouse horticulture.

The acquisition of Delphy by Agriforce highlights another challenge; the growing interest in high-tech greenhouse construction will not only increase the demand for automation and robotisation but also for cultivation knowledge, data-driven cultivation and therefore the use of Artificial Intelligence (AI). It is therefore not surprising that teams from leading international universities and multinationals are participating in the 4th Autonomous Greenhouse Challenge, organized by WUR and sponsored by Chinese giant Tencent. We simply have too few growers who can manage the growing area of high-tech greenhouses worldwide.

Investment companies are logically showing increasing interest in companies that use AI to achieve data-driven cultivation and can thus replace or at least supplement the grower. The expectation is that investors will soon need a total solution, in which the most sustainable high-tech greenhouse complexes can be delivered turnkey at any location on earth, with a guarantee of production and eventually even profitability. This is only possible with extensive automation, robotization and AI. That will lead to further scaling up, professionalization and clustering of suppliers and greenhouse builders. Atrium Agri has already taken important first steps in that respect.

Private equity is of course no guarantee of success
The valuation of a company is not dependent on the form of financing. At least, that is the theory when valuing companies. So companies with purely bank financing do not, in principle, perform better or worse than companies with private equity. In the end, it all comes down to a distinctive proposition, a growing market and a good team.

An inventory by the Financieele Dagblad in 2019 showed that a series of Dutch companies owned by private equity were underperforming. They resold the debt of these companies, so-called leveraged loans (LBOs), with hefty discounts of sometimes more than 50%. The most high-profile examples are V&D and Hema. V&D was initially bought by KKR, mentioned earlier in this article. KKR purchased V&D and then sold all the real estate, whereby the new property owners were given a guarantee that the V&D branches would remain in place for a high rent. KKR had thus immediately recouped a large part of its invested capital. KKR sold the emaciated shop formula to Sun Capital. Hema then ended up at the British investment company Lion Capital in 2007. Marcel Boekhoorn bought the company through his investment company and the debt at the time was around €1 billion. In 2015, V&D succumbed to high debt and excessive rents, among other things.

Last year, Hema was narrowly saved by a takeover by Mississippi Ventures (of the Van Eerd family and owner of Jumbo) and investment company Parcom.

Unfortunately, we also see similar examples in greenhouse horticulture. Data from the Chamber of Commerce show for instance that Dümmen and Codema have been performing poorly financially for years. These companies also have relatively high financing costs and subsequently little financial room for growth and innovation.

Dümmen announced an IPO in 2018, but this was called off at the last minute due to disappointing results. Owner BC Partners has not had much luck with Dümmen. This is evident from the most recent figures for 2020; on a turnover of over EUR 340 million, an EBITDA of rounded minus EUR 10 million was realised. Interest-bearing debt amounted to no less than EUR 260 million at the end of the financial year. Codema sees its turnover almost halve in 2020 to EUR 44 million and achieves an EBITDA of minus EUR 6.5 million in that year. At the end of 2020, the debt burden will amount to EUR 13 million.

Not all investments by private equity companies are successful. Relatively high financing costs play a role at Dümmen and Codema. If potentially good companies are linked to the right investment companies with the right structure and strategy, the chances of success are greatest. It is always about the right (sector) knowledge, structuring, vision, network and people.


This article was previously published in edition 3, 36th year of Primeur. See

For more information: 

Publication date:
© /

Receive the daily newsletter in your email for free | Click here

Other news in this sector:

Sign up for our daily Newsletter and stay up to date with all the latest news!

Subscribe I am already a subscriber