Turkey, as an emerging market, has its ups and downs to invest from time to time. These times depend on several different factors, but tracing them has crucial importance for investors. Focusing into Mergers & Acquisitions deals can be inspiring when taking decisions for investments.
According to the Deloitte, Annual Turkish M&A Review 2014, this year has brought positive approaches to Mergers & Acquisitions deals in terms of increasing its total volume and its number of transactions compared to the previous year for Turkey. 2013 was a shocking year to experience a sudden decline of these deals by investors. It can be said that 2014 opens the door slightly and gives signals of recovery in a way.
To see this changing mood in Turkish markets, overall investment in Turkey should be mentioned, by taking into account that investors' confidence in Turkish markets for M&A deals. Then it can be compared with the previous years to see this change in numbers. This writing is going to emphasize these important points, then it will point out the M&A in energy sector and the privatizations to make the overall looking seen complete to understand the skeleton of this investing area. At last, expectations for 2015 will take its roots from these progresses to give clues for investors.
Mergers & Acquisitions deals are where the confidence of investors for the sectorial markets can be seen easily. From the yearly data of total volume and transactions of deals, the confidence maintained or lost for the markets can be determined roughly. From the report of Deloitte, Annual Turkish M&A Review 2014, general tendency in 2014 shows an increase in this trust for Turkish market when compared to the previous year, 2013. Despite the fact that Turkey is seen as having an unfavorable situation in terms of geopolitical and economic conditions, it is clear that investors didn't lose their confidence in Turkish market.
According to the Deloitte, Annual Turkish M&A Review 2014, M&A deals volume in Turkey has increased compared to the previous year and in a way it bounced back after 2013. In 2014, Mergers & Acquisitions total deal volume was around US$21 billion and there were 236 transactions. This volume shows an almost 20% growth compared to the previous year, 2013, when total deal volume was around US$215 billion. This increase also gives us the information that investors maintained and even raised their confidence in Turkish market.
The other aspect of this increase is seen when looked at the foreign investors in M&A deals. When foreign investors generate 30% of total deal volume in 2013, this ratio raises to 38% in 2014. This increase shows us that foreign investors' contribution to deal volume is getting more meaningful, but it still makes M&A total deal volume search for the ratios of the years 2012 or before, when foreign investors' contribution was about 60% of total deal volume.
As another aspect, financial investors can be considered. It is known that in 2014, financial investors' volume is around US$2.1 billion with 36 transactions. In 2014, financial investors contribute with only 10% of total deal volume with 2% decrease when it is compared with 2013, in which percentage was 12%. Even in 2012, the ratio was 7%. It can be concluded as; this ratio doesn't directly reflect the volatility of total deal volumes or number of transactions.
2014 is also important because privatizations' share in total deal volume reaches the peak with 41% in this year with around US$8.6 billion. The largest deal volume in privatizations is the privatization of Milli Piyango with around US$2.8 billion. The other privatizations are mainly in energy sector, along with infrastructure and construction sectors. In 2014, there were 40 (34 utilities + 6 oil and gas) transactions in energy sector, which is enough to catch up to the transactions of the previous year, 2013 (37 utilities + 3 oil and gas). However, 2014 stayed a little bit behind in the terms of total deal volume in this sector when it is compared with 2013's. It was around US$7.1 billion in 2013, but in 2014 total deal volume was around US$5.6 billion with about 20% decrease.
Expectations for 2015
Even though progresses are making an impression that Turkish market has bounced back, 2015 is coming also with some uncertainties. However, it is also important to remember that some risks should be taken to benefit from them in the future. As an emerging market, Turkey has risks for investors in the upcoming year, 2015, because there are lower growth expectations in general. Also, the existence of general elections can make 2015 a hard year to attract investors' attention. However, considering growth potential in Turkey for long-term investments, Turkey can be attention grabbing for investing.
Source: Deloitte, Annual Turkish M&A Review 2014
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