Turkish companies on overseas buying spree
Turkish investors spent about $2.3 billion on foreign acquisitions in 2016, inking 42 deals, with companies with strong financials continuing to boost their regional and global holdings, according to a review by consulting firm Deloitte.
Smaller-scale companies were also keen to explore cross-border investment opportunities, Deloitte’s Turkish Outbound M&A Review 2016 said. It included estimates for transactions with undisclosed values.
“While the deal number remained largely flat compared to recent years, the deal volume was at the lowest level in the last five years,” Deloitte said in the review. “The largest deal was the acquisition of Puerto Bolivar Harbor by Yilport Holding with a deal value of $750 million, which represented about 33 percent of the overall annual volume.”
The review looked at the motives for Turkish companies to make overseas acquisitions. Market diversification, global footprint, brand acquisition and raising their competitive advantage through cost efficiencies were the main motives, similar to previous years, it said.
Significant market growth potential in Iran
Turkish investors mostly preferred to acquire either full ownership or a controlling stake in foreign targets, according to the review. Companies with various profiles have been pursuing investment opportunities abroad to accelerate their growth, it said.
Challenges for overseas M&A activity are now expected due to volatile markets and the lesser availability of funds. Both developed and emerging markets are expected to continue to be on the radar of Turkish investors, due to strong market fundamentals, sectoral dominance and growth potential, according to Deloitte. Iran, offering significant market growth potential in various industries, will likely be targeted by many Turkish companies in the coming period.
Big players drove the outbound activity
In 2016, foreign acquisitions were driven by large-scale corporates and group companies, including Dogus Group, Global Liman Isletmeleri, Yildirim Holding (which owns Yilport Holding), MNG Holding, Trakya Cam, Arcelik and Vestel.
Through acquisitions in restaurants and hospitality, infrastructure and mining, Dogus Group, Global Liman Isletmeleri, Yildirim Holding and MNG Holding maintained their pattern of regular acquisitions in recent years, and together accounted for almost half of the total number of overseas deals.
Arcelik, which acquired Dawlance for $258 million, Trakya Cam and Vestel also continued to expand their global footprint, and Turkish Aerospace Industries (TAI) and BPlas made overseas acquisitions to develop their presence in aviation parts manufacturing. While Yilport Holding ’s purchase of Ecuador’s port Puerto Bolivar Harbor was the largest transaction, Ziylan and Capiton AG’s acquisition of Reno Shoes, Europe’s second-largest shoe retailer, was another major deal.
Yilport to be among the top 10 international port operators
Yildirim Group’s Yilport Holding added the 21st port to its global portfolio in its drive to be among the top 10 international port operators by 2025. Securing the rights to Puerto Bolívar Port in Machala City, Ecuador, in a 50-year concession will see Yilport committed to invest $750 million in the port and allow the largest container ships globally to berth and receive services at Puerto Bolívar. The concession agreement was signed on August 8, 2016 at Puerto Bolívar.
Largest ever Turkish investment in Ecuador
The deal marks the largest ever Turkish investment in Ecuador. Yilport Holding is to invest in five phases for the development and modernization of the port, creating Latin America’s largest container terminal with 2,5 million TEU annual container handling capacity. Initially, Yilport will invest $230 million in the
first phase, which will span three years. Upon completion, the port is set to become the largest and the most advanced container terminal on the Pacific coast of Latin America. Puerto Bolívar will boost the foreign trade volume of Ecuador, and will constitute a strategic role in the global network of Yilport Holding.
Italy was the most active country for Turkish investors
As Turkey’s largest trade partner, the euro zone maintained its dominance among target markets with 32 deals, or about 76 percent of the acquisitions, worth a combined $1.2 billion, including estimates for transactions whose values were not given. North America saw five deals worth about $900 million, including estimated deal values.
Italy was the most active country for Turkish investors with nine deals, followed by Germany and Spain with five deals each. New frontiers such as Bangladesh, Burkina Faso and Ecuador appeared for the first time on the list.
Infrastructure deals were significant in 2016
Infrastructure, restaurants and hospitality and manufacturing were the top three sectors, both in terms of the value and number of deals, and together accounted for 83 percent of the total volume and and 52 percent of the number of deals.
Infrastructure deals were significant in overall outbound activity in 2016, and targets in neighboring regions were acquired by Yildirim Holding, Global Liman Isletmeleri and Ekol Lojistik.
Mediterranean region attracted ports and tourism investments
As in previous years, Dogus Group demonstrated strong interest in the restaurants and hospitality business and sealed all eight of the deals in this sector, including buying Hotel Villa Manga for $196 million and Hilton Athens Hotel for $155 million. MNG Holding pursued strategic opportunities overseas and realized three deals in mining, with a focus on Africa.
Regional and sectoral investment patterns emerged. For example, the Mediterranean region attracted investment in ports and tourism facilities, while Africa and Canada saw mining investments and eastern and cen- tral Europe, as well as Asia, saw manufacturing deals.
In the preceding decade, food and beverage, infrastructure, energy, real estate and manufacturing were the sectors mainly targeted by Turkish companies in other geographies in the last decade.