M&A in Turkey by numbers
The number of mergers and acquisitions (M&As) in Turkey has experienced a similar growth to the Turkish economy.
In 2012 they reached 259 with $28bn of volume, of which foreign investors accounted for 51%, and 73 M&As have already been taken place during the first quarter of 2013 with a volume of $8bn. This represents a 40% increase on the same period last year.
Those numbers are even more staggering given the fact that the volume of M&A transactions in Turkey was only around $1bn a decade ago.
Reasons for the growth
There are several reasons for the current boom in the number of M&As in Turkey. The most important is the end of the delicate political situation based on shaky coalition governments a decade ago and the emergence of political stability, contributing to the macro-economic stability in the country.
Moreover, Turkey has transformed itself into an economic hub in its region and managed to attract $123.7bn of FDI during the last decade. Its low level of public debt to GDP, it high level of economic growth, drastic reduction in inflation, its centrally located geographical proximity to Europe, the Middle East and Caucuses and the size of its market with 75 million inhabitants, all combine to create an economic powerhouse with a significant economic clout.
In addition to the political and economic stability, the emergence of the younger generation of business owners who view M&As more favourably and their taking over of family firms have paved the way for the significant increases in M&A activity.
The change, not only in the leadership structure of the firms but also in the structure of the financial services industry, provided the necessary boost to M&A activity. The establishment of investment banks has been accompanied by Turkish private equity firms and law firms that are specializing in M&A transactions providing the necessary expertise of financial with the legal knowledge.
Since the Turkish economy has been growing steadily for more than a decade now, the consumer economics has reached new heights in Turkey with millions of Turks having greater purchasing power.
The majority of the M&As in Turkey in the recent past have taken place in the consumer goods, healthcare, retail, telecommunications, financial services and energy sectors. This is natural for a country lacking natural energy resources and suffering from a deficit exacerbated by energy imports.
The M&As that took place last year in the private sector have accounted for the 40% of the overall M&As in Turkey and the rest came from the public sector. The previous year private sector M&As mainly focused on the financial sector, alcoholic beverages, transportation and pharmaceuticals.
Last year 99.85% of the Denizbank shares were acquired by the Russian Sberbank for $3.851bn and 99.26% of Eurobank Tekfen shares were acquired by Kuwaiti Burgan Bank for $355m. 24% of the Anadolu Efes shares, one of the leading firms operating in the alcoholic beverages sector, were acquired by the the UK’s SAB Miller for $1.9bn. 38% of the TAV Airports Holding shares were acquired by the French Aeroports de Paris for $874m and the American Amgen paid $700m to acquire the 99% of the Mustafa Nevzat İlaç operating in pharmaceutical industry.
As the volumes demonstrate, the M&A activities in Turkey have reached new heights during the last 10 years.
Despite the risks associated with the deficit and the exchange rates, the Turkish economy has already proven its resilience during the turbulent economic times since the end of 2008 and this should serve as a powerful reminder for the investors seeking to engage in to M&A activities in Turkey.