Turkish mergers and acquisitions will probably amount to 3 percent of gross domestic product this year compared with 3.5 percent in 2012, Deloitte & Touche LLP said, with the slowing deals sustained by privatizations.
That amounts to $26 billion based on Turkish government forecasts that the economy will grow 4 percent this year to $858 billion. Even in a worst-case scenario, M&A transactions will reach at least $15 billion as the government is expected to sell state assets to help finance budget and current account deficits, said Mehmet Sami, Deloitte’s partner for financial services in Turkey, in a news conference in Istanbul today.
Turkey had 259 M&A transactions last year valued at $28 billion, up 87 percent from the year before, Sami said. The country drew international investors including Diageo Plc (DGE), OAO Sberbank (SBER), E.ON SE (EOAN), Amgen Inc. (AMGN:US) and Aeroports De Paris (ADP) in the past two years.
“We expect some western European companies to choose Turkey for investment to benefit from the relatively better growth perspective here,” Sami said. “We are also seeing increasing interest from investors in Russia, and strategic and sovereign funds planning to come here from Asian Pacific countries.”
Anticipation of a second rating agency’s upgrade of Turkey to investment grade this year following Fitch Ratings is boosting interest in Turkish assets, Sami said. Fitch increased Turkey to BBB-, investment grade for the first time since 1994, from BB+ with stable outlook, on Nov. 5, citing an easing in economic risk and lower government debt.
“Turkey is now in a better and suitable position to find partners and financial resources,” Sami said. “We will also see more M&A deals among Turkish companies, especially those buying assets from the government’s privatization drive.”
Turkey has seen $150 billion of deals in the decade ending last month and the annual average of $15 billion is expected to continue as long as the country maintains its growth, Basak Vardar, a corporate finance partner at Deloitte in Istanbul, said during the same news conference. Fifty-seven of all transactions, or 6 percent of the total volume, were made by private equity investors in 2012, she said.
About $12 billion of announced transactions last year were state asset sales, Vardar said. State asset sales may be a big source of deals this year as the government plans block sales of shares in the national lottery operator Milli Piyango, as well as sea ports, power plants and grids, Vardar said.
A group comprising Koc Holding AS (KCHOL), Turkey’s biggest group of companies, Istanbul-based private equity firm Gozde Girisim Sermayesi Yatirim Ortakligi AS (GOZDE), and Malaysia’s UEM Group Bhd bid $5.7 billion for the rights to operate bridges and roadways in an auction in Ankara on Dec. 17. Celikler Taahhut Insaat & Sanayi AS, an Ankara-based builder and miner, bid $2.25 billion to buy the 600 megawatt Seyitomer power plant and operate the coal mine that feeds it on Dec. 28.
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