Mergers and Acquisitions 2014 Report
Despite increasing liquidity pressure on the emerging markets and two elections in Turkey, investors maintained their confidence in the Turkish market in 2014 and total M&A deal volume was at around US$21 billion with 236 transactions. Privatizations, mainly realized singlehandedly by Turkish investors, made their highest contribution ever to the annual deal value. Despite the deal volume of foreign investors increased substantially compared to 2013, their contribution remained behind that of the Turkish investors.
Deloitte’s ‘Mergers and Acquisitions Report 2014’ provides an overview of mergers and acquisitions in Turkey; according to the report’s analysis, in 2014 total M&A deal volume was at around US$21 billion with 236 transactions.
Privatizations made their highest contribution ever to the annual deal value, representing 41% of the total M&A deal volume
Privatizations representing 41% of the total deal value with US$8.6 billion through 12 transactions. Privatization of Milli Piyango, the largest tender of 2014, comprised by itself 13% of the total deal value. Other privatization deals included some major energy and port assets which were also among the largest transactions of the year. Energy assets, mainly major thermal plants this time, were once again on the stage and represented 22% of the total annual volume.
Foreign investors increased their deal volume by 54% in 2014
Foreign investors, who made the past decade’s lowest contribution to total deal volume in 2013, continued to show constant interest to the Turkish market in 2014 and, though still not as prominent as in earlier years, increased their deal volume by 54%. The share of foreign investors in the annual deal volume was again modest at a level of 38% (US$8 billion) with 113 transactions, as they were largely absent from the big privatizations. Yet, those investors drove the private sector transactions in many industries and made up 65% of the private sector deal value. Turkish investors, on the other hand, represented the remaining 62% of the annual deal volume through 123 deals with a total deal value of US$13 billion, one of the highest levels historically.
The small and middle market vivacity
Despite a substantial part of the deal volume relies on privatizations and a small number of large-scale private sector transactions, majority of the transactions took place in the middle market. 179 transactions each with a deal value less than c. US$50 million, which accounted for 76% of the total deal number, represented only c. 12% of the total deal value. Average deal size in 2014 was c. US$89 million; yet when the largest ten transactions were excluded, the average deal size was c. US$39 million, indicating the scarcity of big-ticket private sector transactions compared to the lively middle-market.
Manufacturing and energy sectors again in the foreground
In terms of deal numbers, similar to the previous year, manufacturing and energy were the most popular sectors.
Looking ahead to 2015, liquidity concerns for emerging markets, upcoming general elections and diminishing growth expectations may signal a difficult period for the Turkish M&A market. Yet, investors continue to believe in the long-term growth potential of Turkey, which still stands out as one of the most promising markets with numerous investment opportunities. Thus the Turkish market will retain its long-term attractiveness in 2015.
The determining impact of mid-size transactions on the market movements will continue in 2015 and the retail, energy, financial services, manufacturing and food & beverage sectors are expected to be strong candidates as the most active M&A sectors of 2015.