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

Turkish Healthcare Market attracts foreign investors

                                                                                                                  

Version française : Fusions acquisitions - Le secteur de la santé en Turquie

Healthcare M&A Activity in Turkey 

The promising Turkish healthcare market has become a hot spot for foreign investors in recent years. Government investments under health transformation programme leading to hospital modernization as well as the consolidation of middle class and high disease burden played an important role in positioning the country as a strong investment destination for healthcare.

 Having an industry of over $21 billion in 2011, the total healthcare market in Turkey is expected to grow at a CAGR of around 9% due to the size of the population and current low consumption rate along with increasing access to funding and private sector expansion.

Cross-border Healthcare M&A in Turkey 

Remarkable Cross-border deals since 2010

 Turkish healthcare market has seen significant foreign investments since 2010 particularly from Germany and Sweden, resulting in high level of deal activity with domestic acquisitions. On the other hand, the acquisition of Acıbadem Sağlık Hizmetleri by Malaysian healthcare giant IHH for $1,260 billion had been one of the most important deals in terms of deal value.

Likewise, American pharmaceutical company Amgen’s acquisition of Mustafa Nevzat İlaç has been a remarkable M&A transaction in pharmaceutical sub-sector. Turkish pharmaceutical sector may be considered already foreign dominant market due to the establishment of international production bases in the country to benefit from Turkey’s geographical position.

 Moreover, majority of the domestic firms were acquired by global players owing to highly skilled human resources in production and management as well as the unsaturated domestic market with high growth potential. Yet there are still available opportunities worth considering. In addition to remarkable strategic investments in this sector, financial investors has also been highly interested in healthcare.

 International Private Equity Activity* 

*completed cross-border deals in healthcare since 2010

Regarding financial investments, UK private equity funds were the most active foreign investors followed by Kuwait in terms of deal volume. On top of population growth and improving demographic indicators, skilled workforce and a gradual rise in life expectancy attracted their interest in Turkish healthcare market.

Moreover, significant private equity exits in the sector also demonstrate the high potential of Turkish healthcare market. For instance, Abraaj Capital’s secondary sale of Acıbadem Hospital and Marfin Investment Group’s exit of Şafak Hospital are important signs for opportunities in the market as those transactions were considered profitable for both sides.

To sum up, sustaining growth of the Turkish economy in the post-crisis period will continue to whet the appetite of both financial and strategic investors, leading increasing healthcare M&A in Turkey and global market growth in the forthcoming years.

Melih Ardalı

For further information: mergerturkey@gmail.com Tweets by @merger_turkey

Fusions-Acquisitions Turquie 2012

Le marché des fusions-acquisitions en Turquie est devenu une cible notable au cours de dernières années. On peut lier cela à sa position budgétaire solide et à son expansion de l'activité économique qui est également couronné par une hausse de la notation de crédit en 2012. 

Des cibles Turques ont suscitées un vif intérêt auprès des investisseurs stratégiques et financiers de partout dans le monde grâce à leur potentiel de croissance. 

Les investisseurs étrangers sont dominants au “buy-side” hors des opérations de privatisation

La grande majorité des opérations de fusion-acquisition a été réalisé sur le marché mid-cap en 2012. Les investisseurs étrangers ont généré un volume de transactions d'environ 10 milliards d'euros avec 119 opérations. Néanmoins, les investisseurs turcs ont participé à 140 opérations s'élevant à environ 11,4 milliards d'euros. 

Hors des opérations de privatisations, la majorité des acquisitions a éte par des investisseurs étrangers, ce qui contribue environ 82% du volume de fusacq dans le secteur privé, tandis que les investisseurs locaux avaient seulement 18%.

En ce qui concerne des investisseurs financiers, 2012 a été une année record avec 57 opérations à 1,3 milliards d'euros. Le commerce électronique, le commerce au détail, la fabrication et le secteur des services ont été les plus préférés parmi des fonds de capital-investissement (private equity)

Comme le marché de fusions acquisitions turc évolue, plusieurs ventes secondaires ont eu lieu en 2012. En plus de plusieurs sorties de private equity (Doors Restaurant Group, Numarine, Pronet), il y avait des transactions secondaires remarquables dans les services financiers (Denizbank, Eurobank Tekfen) et les secteurs de construction et des infrastructures.

La Russie : Le groupe de tête européen en matiére de valeur d’opération

Comme les années précédentes, les investisseurs de la zone euro et les États-Unis ont été les investisseurs les plus actifs étrangers.

Les investisseurs russes étaient le groupe de tête parmi les acheteurs européens en participant à la plus grande opération de l'année. La Russie est suivie par Royaume-Uni et la France en termes de valeur de la transaction.

En participant dans 22 opérations, les investisseurs américains ont continué à exprimer leur intérêt pour le marché turc. Finalement, pour 2012, les investisseurs de Russie, de Royaume-Uni, des États-Unis, d’Allemagne et de France ont été les principaux contributeurs au volume totale des transactions générées par les investisseurs étrangers.

Les acquisitions remarquables de l'année 2012

Pour plus d'informations : mergerturkey@gmail.com

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