Time to be an e-mportant player: E-commerce M&A Turkey

Turkey has been a lucrative investment option for foreign investors yet pre-election uncertainty appears to have lessened the demand for some sectors while other investment areas are still expected to overperform in the near future.

The increasing spend by Turkish consumers has made the Turkish retail sector an M&A hotspot. This, coupled with increasing internet penetration in Turkey, is making foreign investors consider the Turkish e-commerce sector as a prominent investment opportunity.

Online Payments in Turkey - 2008-2013

Source: BKM - Interbank Card Center

*LTM October 2013 / ** Domestic shopping + International shopping with Turkish cards

Since 2008, online payments have increased by 30.9% CAGR reaching to around TRY 40bn online in transaction value, while e-commerce volume rose by 23.6% to c. 200mn transactions in 2013.

Given the expectations of this upward trend, many websites have already received investments from both financial and strategic investors. Investors' demand varied depending mainly on the sales performance, business model, product range, service quality and brand recognition of the websites.

Remarkable Cross-border E-commerce M&A/Private Equity Transactions

Considering recent e-commerce trends, it is reasonable to assume that websites will need better search engine optimization (SEO), customized products, free/fast delivery and other value added services to get an edge over competition.

Moreover, mobile/tablet compatibility should be considered a must-have as "Showrooming" has recently become popular in Turkey. Significant numbers of websites have been on the radar of financial investors, and strategic investors are also expected to realize synergies mainly via international expansion.

Bridge Approach on International Expansion

In addition to the upward trend in consumer demand, Turkey's unique geographic position offers many advantages for strategic investors. Combining geographic benefits with e-commerce will lead to three potential synergies.

Firstly, companies seeking international expansion from Europe to Middle East or vice-versa will have an opportunity to realize it through Turkey, where they can establish logistics and inventory management structures for their further expansion.

Secondly, due to the cultural mix of European and Middle eastern life-styles, the consumer profile in Turkey will give valuable insights about target consumer preferences while facilitating smooth expansion toward those territories.

Thirdly, entrepreneurs seeking to launch their products in Turkey but lacking optimum locations may realize their goals via e-commerce M&A where total costs/risks may be even less than the traditional brick-and-mortar retail approach.

With these alternatives leading to long-lasting interest of strategic buyers, financial investors are getting even more excited as exit opportunities are vast in the Turkish e-commerce market. However, no matter how good the circumstances are, timing is crucial to succeed in e-commerce M&A for both sell-side and buy-side.

In this respect, an M&A professional with a pragmatic approach will come in useful. Having such a professional seeking win-win strategy with optimum terms (rather than rushing to close any deal) will get you the best outcome.

The possibilities are endless. Despite the crowd, you can still be an e-mportant player on M&A, where M stands for Money-making and A for Adventure.

Melih Ardalı

For further information: mergerturkey@gmail.com

Tweets by @merger_turkey

Are you S.m.a.r.t ? - Retail M&A Turkey

Retail sector has always been popular among financial investors thanks to its steady cashflows and significant growth potential as it offers a good match for Private Equity business models. Many retailers are seeing M&A as a chance to expand their capabilities while improving market presence and omnichannel sales. On the other hand, Turkey is considered one of the brightest spots for retail investments. It is not a surprise, given its growing economy and favorable consumer demography. Also its unique location as a gateway to the Middle East and Caucasus shows promise for other opportunities.

Having said that, let's return to our initial question. Are you (S.M.A.R.T) Succeeding Mergers & Acquisitions of Retail in Turkey ? The following chart also gives you insight regarding foreign investors' interest in Turkish retail sector.

Notable Cross-border M&A/PE deals in Turkish Retail Sector

Among those who completed acquisitions in the retail sector, "S.M.A.R.T"s occurred as they realized synergies and benefited in many ways in addition to profitability.

Yıldız Holding,owner of Turkish food giant Ülker is one of them since it acquired the Şok supermarket chains in 2011. With that deal, the company had a chance to develop many strategies related to pricing, product positioning, low-cost product development and so on and so forth. Moreover, the company also had the opportunity to analyze overall customer feed-back and supported its strategies accordingly. Having taken advantage of this deal, Yıldız Holding completed the acquisition of the Turkish arm of Dia supermarkets in 2013, therefore doubling its number of stores and aiming for market leadership in the forthcoming years. Apart from pure profitability, combined strategies will also have a positive impact on the Turkish food giant's long-term success.

Secondly, global giant Walmart's Asda stores acquired GAAT, its Turkish supply partner that manages Asda's garment production in key locations such as Turkey, Egypt and Sri Lanka. A 15 year strategic alliance led to this acquisition as GAAT played a key role in building Asda's clothing line, George, as one of Britian's favorite brands. With this acquisition, Asda had not only acquired a profitable business, but also internalized GAAT's supply chain management expertise for further growth plans and had the flexibility in the processes to provide higher customer satisfaction.

We can also add BC Partners to that list, as they are about to realize a successful exit from their investment in Migros Türk. Having contributed to  Migros' growth with the disposal of hard-discount stores and in return making strategic add-on acquisitions, BC Partners' success can be viewed as a good blend of PE firm's management skills and local team's market expertise. As a result, Migros Türk is now on the radar of many global retail giants as well as Turkish conglomerates. 

Above-mentioned success stories are only a part of the picture, yet there are many opportunities available in the market. Considering the urban development project and other infrastructure investments in Turkey, M&A activity in retail sector will be on the rise with the business expansion in hinterland.

But, will they be S.M.A.R.T? Time will tell.

Apart from that, it is essential to find an M&A professional who understands both sides and Turkish market dynamics as well as providing the unique insight that may even lead to first-mover advantage in some cases. It is not a rocket science to find one, as long as you really know where you are looking.

To sum up, opportunities lie ahead in Turkey for those who can successfully analyze the market and better read the bigger picture. Hope you can be among the ones (if not so far) who are S.M.A.R.T and seize the untapped potential in Turkish retail market.

Melih Ardalı

For further information: mergerturkey@gmail.com

Tweets by @merger_turkey

Fusions-acquisitions dans le secteur de l’isolation en Turquie = Un investissement efficace (en énergie)?

English Version: M&A in Turkish Insulation Sector:(Energy) Efficient investment decision? 

En raison de l’augmentation de la consommation d’energie, "la preoccupation environnementale" et "l’efficacité énergétique” sont des sujets de plus en plus abordés en Turquie. En consequence, le secteur de l’isolation en Turquie est devenu primordial ces dernières années.

D’après les données fournies par IZODER, la consommation totale de materiaux liés à l’isolation thermique en Turquie a augmenté de 18% jusqu’à 14,2 million de mètres cube. L’industrie de l’isolation en Turquie a enregistré un TCAC de 18,5% au cours de la période 2008-2012. Malgré cela le marché est loin d’être saturé.

De plus, 85% des bâtiments en Turquie ne sont pas isolés alors que ce chiffre s’élève aux alentours de 40% en Europe. La demande d’isolation est d’environ 0,19 mètres cube, ce qui est bien inférieur aux Etats-Unis et à l’Europe.

La demande de matériaux d’isolation thermique en Turquie 2006- 2012

Source: IZODER (Association des producteurs, fournisseurs et installateurs de matériaux d’isolation thermique, d’imperméabilisation, d’isolation sonore et d’ignifugation).

Depuis 2007, le polystyrène expansé (EPS) est le matériel d’isolation thermique le plus convoité en Turquie et a connu une croissance de 23% l’année dernière. D’un autre côté la demande de laine de verre et de polystyrène extrudé (XPS) a augmenté de 12% et 5% respectivement, mais est encore inférieure à la croissance d’ensemble du marché.

La majorité des industriels sont positionnés sur le marché intérieur comme la capacité exportatrice actuelle demeure limitée. Avec des investissements entrants conduisants à une capacité supérieure, les entreprises d’isolation en Turquie saisiront certainement plus aisément les occasions sur les marchés émergents voisins.

S’agissant des investissements , l’industrie de l’isolation en Turquie a connu beaucoup de fusions–acquisitions jusque-là, la plupart venant d’investisseurs stratégiques comme mentionné ci-dessous. Cependant il y a encore des options viables qui entrent en compte s’agissant à la fois des investisseurs financiers et stratégiques.

Des exemples notables de fusions–acquisitions transfrontalières en Turquie dans le secteur de l’isolation

En plus de fusions-acquisitions transfrontalières en Turquie, il y a eu aussi d’autres investissements étrangers dans le secteur. Par exemple, le producteur autrichien de matériaux d’isolation, Austrotherm a récemment ouvert sa seconde usine d’isolants à Izmir, ce qui indique l’intérêt croissant et la forte confiance dans l’industrie turque de l’isolation.

Des niveaux records attendus pour la prochaine décennie

Malgré une croissance de 18% dans le secteur, il y a encore de la marge pour une expansion du secteur en raison des circonstances suivantes.

Tout d’abord les obligations nées du Protocole de Kyoto s’appliquent à la Turquie, impliquant des investissements pour réduire les émissions de gaz à effet de serre (GHG), en d’autres termes une augmentation significative des besoins en isolation thermique. Parallèlement plusieurs standards (TS 825) et régles (Performance Energetique des Batiments) ont été introduits par le gouvernment turc afin de maintenir l’efficacité énergétique tout en se conformant aux objectifs du Protocole de Kyoto.

Au-delà, le projet de tranformation urbaine en cours aura un grand impact sur le secteur turc de l’isolation. Dans le sillage de ce projet, 6,5 millions d’unités résidentielles seront reconstruites en conformité avec les standards actuels d’isolation. Selon les professionnels de l’isolation, des mesures telles que la réduction de la TVA sur l’isolation thermique et l’exemption de taxe sur les transactions pour les prêts souscrits pour procéder à une isolation sont prévus dans un futur proche.

Brièvement, la croissance significative connue par le secteur de la construction en Turquie continuera à attirer l’attention particulière des investisseurs nationaux comme étrangers sur l’industrie de l’isolation en raison du caractère émergent de l’économie turque mais aussi en raison de projets d’infrastructure imminents.

De plus, la proximité du pays avec d’autres marchés connaissant une croissance rapide de leurs secteurs de la construction tels que la Russie et le Moyen-Orient est une autre raison validant ce choix. Avec l’attention croissante accordée aux questions d’isolation et des politiques gouvernementales favorables, il est raisonnable de s’attendre à une activité de fusions–acquisitions dans le secteur de l’isolation bien plus importante au cours de la prochaine décennie.

Avec un peu de chance, ces transactions s’avèreront efficaces et durables pour les deux parties a l’instar de ce que l’industrie du secteur fait déjà pour les consommateurs.

Melih Ardalı

Pour plus d'informations : mergerturkey@gmail.com

Tweets de @mergerturkey