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

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