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Company mergers and acquisitions (M&A), the trend of the last quarter-century, had an interrupted phase after the global crisis.
Sometimes they occurred as the big fish swallowing the small fish involving troubled companies; other times it came as voluntary mergers to strengthen against the crisis. At other times it was part of restructuring, but their most important lever was privatizations. From central countries to periphery countries, the selling of public enterprises has been the main theme of M&A activities. Especially after the 2008-2009 crisis, such a table in M&A activities has emerged:
In 2007, in other words before the crisis, there had been $3.6 trillion in M&A activities. In the first year of the crisis, in 2008, this figure went down to $2.4 trillion and in the worst year of 2009, further down to $1.7 trillion. In 2010, the activities rose to $2 trillion and over $2.2 trillion in the following year.
In 2014, it leaped and reached $3.2 trillion. What about 2015? In the first quarter of 2015, there have been $719 billion in company marriages.
Meeting in Istanbul
In this active year, one of the umbrella organizations of these intermediator companies that mediate billions of dollars of mergers met in Istanbul. In the M&A Worldwide Conference, top executives of 44 companies from 38 countries met.
Head of M&A Worldwide Björn Voigt said Turkey has always been an exceptional country with its geographic location and human power, adding, “Even if there were flaws in its economy, Turkey has always stood out with its industry, entrepreneurial population, with its dynamic private sector and with its entrepreneurs who are not afraid to take risks.”
Crossborder Executive Partner Çiğdem Bicik, the Turkey representative of M&A Worldwide, said they have put intense effort into this meeting to be held in Istanbul, aiming to increase interest in Turkey and encourage more foreign investors to invest in Turkey.
Top executives of major companies of M&A Worldwide also met with new members or members-to-be; the union also elected its new executive board. Voigt replaced Gerald Turner as president, while Bicik was elected deputy president. One-to-one meetings with members as well as cooperation and partnership opportunities with Turkish companies were discussed.
Voigt said Turkey has been a country that Europe has always traded with and has been influenced by its culture. “Today, only in Germany there are 3.5 million Turks. I do not even include other European countries. As a candidate member of the EU, Turkey has already harmonized quite a number of its domestic laws with the EU’s laws, including its constitution… Of course there are many more steps to be taken. Turkey stands out with its lively and dynamic private sector and with its entrepreneurs who do not fear taking risks,” he said.
Bicik said, “M&A Worldwide, only in 2014, mediated nearly 250 deals reaching an approximately $4.5 billion deal volume. We have put a lot of effort to hold this meeting in Istanbul. Our aim was to increase interest in Turkey, to encourage more foreign investors to invest in Turkey and to introduce Turkey and the Turkish business world to foreign companies looking for potential partners in Turkey.”
M&A in Turkey
Just as in the rest of the world, Turkey saw significant company mergers in the last quarter-century. After 30 years of privatization, Turkey sold public enterprises worth $65 billion. These activities form the backbone of M&As.
According to Deloitte Turkey’s “Annual Turkish M&A Review 2014,” in 2014 there were 236 mergers. The value of those deals was approximately $21 billion. The trends in the mergers and acquisitions were similar to 2013; while major privatizations increased the volume of deals, the source of activities was the small and medium-sized market. Despite the continuation of the appetite of foreign investors and private capital funds, they are acting cautiously.
The contribution of privatizations to the deal volume was 41 percent, its historical high. Local and foreign investors constituted 62 percent and 38 percent of the deal volume, respectively. The deal volume of foreign investors increased 54 percent compared to 2013. Those deals under $50 million, which constituted 76 percent of the number of deals, stood out. In the first period after the crisis, while a decrease was observed in the number of deals of private capital funds, it was also seen that they were more cautious and selective in their investment decisions.
However, the deal of Milli Piyango, because of the withdrawal of the acquiring company, removed $21 billion dollars from the list.
Performance in 2014
The contribution of foreign investors to the deal volume dropped to its lowest level in 10 years in 2013. In 2014, foreign investors’ contribution to the deal volume increased 54 percent; but, again, with 113 deals constituting a deal volume of $8 billion, their share in the total deal volume remained at a level of 38 percent due to the fact that privatizations were done by Turkish groups. When privatizations are excluded, then the share of foreign investors in private sector deal volume was 65 percent.
Foreign investors were mostly interested in the production and wholesale and distribution sectors as well as bank deals in the financial service sector. European and North American investors, with their 58 and 23 number of deals, respectively, constituted the majority of the number of deals by foreign investors, totaling 72 percent. Far Eastern investors, with their 19 percent, have maintained their interest in the Turkish market since 2012.
General elections, the downward revision of the growth estimates and several negative signs such as the fragilities in emerging markets all point to the year 2015 being a tough period in terms of mergers and acquisitions in Turkey.
In 2015, it is estimated that medium-sized enterprises will continue to have a determining effect on the activities of the market. It is also estimated that the most active sectors will be the retail, energy, financial services and production sectors. On the other hand, it is hoped that, especially in the second half of the year, large-scale activities in the financial, entertainment and energy sectors will happen.