ANKARA (Turkey), May 7 (SeeNews) – Turkey’s mergers and acquisitions (M&A) market this year is seen at around $25 billion (19 billion euro), just off the 2012 mark of $28 billion, with privatisation deals expected to provide the main boost, the managing director of Raiffeisen Investment Turkey said.
“The M&A boom that Turkey is experiencing is underpinned by several key factors. The country is now seen as quite stable in terms of both political and macroeconomic environment. Inflation has come down to the single digits over the past decade while the economy has been growing by an average of 5.5% per year,” Gokce Kabatepe told SeeNews in a phone interview from his office in Istanbul.
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The benign macroeconomic and political environment has led to a spike in foreign direct investment to a current average of $10-15 billion a year, up from the $1.0-2.0 billion annual range in 2003-2004.
Another key M&A driver in Turkey is the inflow of private equity. Kabatepe said private equity investors started to enter the Turkish market only 6-7 years ago and that was followed by a significant pick-up in activity. “Now it is time to see some of those first movers exit their investments and that process will also fuel the local M&A market.”
The expert sees all sectors of the Turkish economy that stand to benefit from the country’s positive demographic trends as hotbeds of M&A activity. In more specific terms, he singled out pharmaceuticals, retail, health care, energy and e-commerce.
Pharmaceuticals is one of the most fragmented sectors in Turkey with the largest company having only a 6.5% market share, Kabatepe pointed out.
“The energy sector is also fragmented. The bigger players that have foreign partners will probably acquire some smaller players, mainly on the power generation side.”
In the banking sector, however, most of the large deals have been completed so the M&A outlook is a bit more muted. “Any sizeable foreign bank you can probably think of is already present on the Turkish market. Another dampening factor is that book multiples are quite high in Turkey compared to the local banks’ European or global peers so to acquire a bank here has become very expensive,” Kabatepe said.
He still expects that a couple of banks – Halkbank or Ziraat, for example - may be privatised this year through initial or secondary public offerings.
Last year, the privatisation process in Turkey was mainly focused on electricity distribution. In 2013, Kabatepe expects sell-off tenders for major tollways and sea ports. Another key infrastructure tender this year involves the award of a build-operate-transfer concession for a third airport in Istanbul.
Although Norway’s Telenor has just snapped up Bulgaria’s Globul from under the noses of Turk Telekom [BIST:TTKOM] and Turkcell [BIST:TCELL], the expert still expects both Turkish telcos to remain active on the M&A side.
“Turk Telekom is quite aggressive in the M&A arena and they have a war chest of almost a billion dollars for acquisitions. So they should be able to be a significant M&A player in the region.”
In his view, Turkcell is also very cash-rich but because of shareholder issues it is not as easy for them to make decisions on such investments.
In the aviation space, Kabatepe said Turkish Airlines [BIST:THYAO] could be interested in doing deals outside of its home market, possibly eyeing Polish flag carrier LOT, while airport operator TAV and Celebi Ground Handling could also be interested in doing some M&A moves abroad.
($=0.7625 euro)