Mergers and acquisitions increase despite shaky first half
Posted by meb at August 7th, 2008
Turkey’s mergers and acquisitions (M&As) saw no letup in the first half of 2008 even though the country’s economic and political agenda was fraught with tension, compounded by a global credit crunch, a recent report has shown.
“M&A Operations in Turkey:
Mid-year 2008 Assessment,” prepared by Deloitte and the Turkish weekly Ekonomist magazine, was released yesterday. It shows that there have been 92 M&As with total transaction volume of $11 billion, representing an increase over the same period of last year, when total M&A transactions reached $10.5 billion. Turkish M&As, the report noted, pulled through partly because the credit crunch had shifted the funds’ focus from developed countries to developing countries.
Although battling a global credit crunch and facing uncertainty caused by a case that was pending at the Constitutional Court that sought to close the ruling Justice and Development Party (AK Party), Turkish M&As, the report noted, pulled through partly because the credit crunch had shifted the funds’ focus from developed countries to developing countries.
This performance was assessed as confirmation of Turkey’s continued perception as a country to invest in, where expectations for significant growth are still valid, the report noted.
Out of 92 transactions in the first half, 52 had a disclosed deal value amounting to $10.1 billion. Adding the anticipated value of undisclosed deals, total M&A volume hit $11 billion. In all of 2007, the total M&A volume was $21 billion.
Against 57 transactions by foreign interests, Turkish companies made 35 purchases totaling $2.8 billion. Of the total deal value in the first half of 2008, 75 percent was generated by foreign investors. In contrast to nine transactions in 2007, US-based investors concluded only one deal so far this year. Investors from the Gulf region have remained silent, with only minor involvement in total deal volume.
Multi-billion dollar deals took place again in the first half. The largest deal was British American Tobacco’s (BAT) acquisition of a 100 percent stake in Turkey’s alcohol and tobacco monopoly’s (Tekel) tobacco division for $1.72 billion. The sale of a 50.8 percent share in Migros Türk to a consortium of BC Partners, DeA Capital and Turkven Private Equity for $1.7 billion was the second largest deal in the first half of the year. The third largest deal was the purchase of Başkent Doğalgaz by the Global Yatırım Holding-Energaz-ABN Amro consortium for $1.61 billion.
These three transactions made up 45 percent of the total deal volume, whereas the top 10 deals accounted for 75 percent. The average deal value was $120 million. There were 35-40 deals in the mid-cap segment, adding up to a deal value of $2.5 billion.
Financial investors impacted strongly on Turkish M&A activity in the first half of 2008. In particular, the Migros, Acıbadem Sağlık and Başkent Doğalgaz deals were examples of how keen financial investors are for the Turkish market. Financial investors engaged in a total of 18 transactions, adding up to $4.2 billion. This represents 38 percent of the total deal volume in the first half. M&A-active sectors in the past five years, such as financial services, food and beverage, services, media, retail and energy, remained the most active in 2008 as well.
The report underlined that for the first time in a number of years, the energy sector outperformed the financial services sector in terms of deal value and ranked first with four deals, exceeding a total value of $2.1 billion — excluding deals with undisclosed values.
It also focused on prospects for the remaining half of the year. “Despite the promising start to the year, there are concerns regarding the second half of 2008 in terms of M&A activity, due to the unfavorable global economic climate and the delays in investment decisions caused by the recent closure case against the AK Party,” the report stated. Still, it estimated that the total M&A volume in 2008 would be around $17 billion. Although significant progress has been achieved in the preparatory studies for some large privatization projects — including the sale of the operating rights of highways and bridges, the privatization of sugar refineries, the national lottery, Halkbank and electricity distribution grids, they might not be finalized this year, the report predicted. It went on to say that the course of privatizations in the second half of 2008 will have a strong bearing on total deal volume at year end.
source: Today’s Zaman
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