Under Dutch policy, coffeeshops may sell cannabis subject to strict conditions of tolerance. The cultivation of cannabis and its supply to coffeeshops, however, remain prohibited. This is popularly known as the back-door problem.
The Closed Coffeeshop Chain Experiment Act (the Act) of 13 November 2019 was adopted to address this. The Act provides for an experiment (the Experiment) with quality-controlled cultivation and sale of cannabis for recreational use. For that purpose, the Act provides for an exemption from the relevant prohibitions of the Opium Act. The exemption applies only to acts performed within the preparation, execution and wind-down of the Experiment.
Ten municipalities participate in the Experiment. Coffeeshops in these municipalities may only sell cannabis supplied by ten designated growers. These growers are Aardachtig, CanAdelaar, Fyta, Holigram, Hollandse Hoogtes, Legacy Brands, Leli Holland (now Village Farms Netherlands), Linsboer, Q-Farms and The Growery (the Growers). The Growers were selected by lottery and were subject to an integrity screening.
Duration of the Experiment
The experimental phase commenced on 7 April 2025. It has a minimum duration of four years and a maximum duration of five and a half years. It is followed by a wind-down phase of no more than six months. An independent evaluation committee is expected to report around the summer of 2028. A decision by the cabinet on the subsequent regime is expected in 2029.
Foreign ownership and cooperation
At present, two Growers are openly owned by foreign parties. On 15 October 2026, Cronos Group announced the completion of its acquisition of CanAdelaar, one of the growers participating in the Dutch cannabis experiment. According to Cronos, the base purchase price amounted to EUR 57,5 million, possibly increased with an earn-out. The permit under which CanAdelaar operates is of a temporary nature. The regulatory regime that will apply after the Experiment has not yet been determined.
Village Farms acquired an option on 80% of the shares in Leli Holland in 2021 and subsequently acquired full ownership in September 2024. Limited public information is available on the ownership of the other eight Growers, but it is well known that foreign parties are involved in different forms.
Cooperation with foreign parties is however limited to the contribution of knowledge, genetics and capital. Cannabis produced within the Experiment may only be supplied to coffeeshops in the participating municipalities.
Integrity screening under the Bibob Act
The Public Administration (Probity Screening) Act (Wet Bibob) enables public authorities to examine whether businesses and their relations have criminal antecedents. The Growers were screened prior to obtaining their permit and are rescreened every two to three years. According to the government’s answers, a change in the shareholder structure may give rise to a new Bibob investigation. A negative outcome may ultimately result in the withdrawal of the permit. Bibob-screenings are known to be extremely thorough.
Part of the regulatory risk may therefore arise after signing. In the CanAdelaar transaction, the parties extended the long-stop date twice. Cronos subsequently waived its conditions to completion. Completion took place before the minister had taken a final decision in the Bibob procedure. Acquirers should therefore review their ownership and financing structure at an early stage. Sellers should anticipate that acquirers will seek contractual protection against an adverse outcome of the screening.
Valuation
Conventional valuation methods assume the continuation of the business. The Experiment, however, is temporary. The terminal value must therefore be based on scenarios rather than on a long-term growth assumption.
Several factors affect the value of a Grower. The number of Growers is limited to ten, and new parties cannot readily enter the market during the Experiment. The locations, equipment and quality systems retain a certain value in each scenario. The permit cannot be acquired separately from the company and is therefore reflected in the value of the shares.
According to Cronos, the base purchase price for CanAdelaar corresponds to approximately 1.4 times net revenue and 2.9 times adjusted EBITDA, based on annualised results for the first half of 2026. This multiple may indicate that the purchase price was determined primarily on the basis of current earnings, taking into account the limited duration of the permit.
An earn-out may reduce differences in valuation between the parties. In the Cronos transaction, the earn-out amounts to 0.5 times normalised EBITDA for each of the financial years 2026 and 2027. The earn-out period ends before the expected decision on the post-Experiment-regime. The political risk therefore remains with the acquirer. In addition, the seller has granted an indemnity of up to EUR 22,5 million in respect of Bibob and odour risks.
Due diligence findings are generally reflected in the purchase price. Findings may lead to a price adjustment, an escrow arrangement or a specific indemnity. In the CanAdelaar transaction, the environmental authority had proposed a fine of EUR 12,5 million for odour nuisance. The parties treated this amount as debt and deducted it from the purchase price. Any difference with the final fine will be settled between the parties. Customary warranties offer limited protection, as damages do not restore a withdrawn permit.
As the permit is held by the company, a share transaction is the obvious structure. The Bibob screening and the existing liabilities of the company should then be taken into account in the purchase price.
Financing and exit scenarios
Access to banking services has been limited. A common bank account generally is possible, but obtaining finance is not. Acquisitions are therefore likely to be financed mainly with equity and shareholder loans. This may favour strategic acquirers over leveraged financial investors.
If the Experiment ends without a subsequent regime, the legal basis for cultivation will lapse. In that case, the value of a Grower will consist mainly of its real estate and equipment. An extension of the experimental phase would extend the period by a maximum of eighteen months. In the event of a regulated market, the Growers would have operational facilities and regulatory experience. According to Cronos CEO Mike Gorenstein, full legalisation would require at least three or four additional cultivation sites. A sale to a strategic acquirer would appear most likely in that scenario.
Conclusion
The outcome of the Experiment remains uncertain. Termination, extension and a regulated market are each possible. At the same time, two listed North American companies have acquired Growers whose permits may lapse within a few years. The mayor of Breda, one of the participating municipalities, regarded the interest of Cronos as an indication that the market has confidence in the Experiment. These transactions suggest that market expects the regulated supply chain to continue in some form, but unfortunately none of us has a crystal ball. Undoubtedly to be continued.
About the Author
Geert de Nijs is a partner at Fieldfisher in Amsterdam. He advises on M&A and corporate transactions, including in the regulated cannabis sector.
Disclaimer: Guest articles reflect the views of their authors and not necessarily those of the editorial team. No investment recommendation.