Private Equity Funds in Turkey: Will We See a Reload ?

Private equity funds are collective investment schemes used for making investments in various equity securities according to one of the investment strategies associated with private equity. They can be can be used to capitalize new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. In the developed countries, they played a fundamental role of bringing together wealthy investors and private companies (especially not traded on a public stock exchange) in need of capital.

In 2000, Turkven Fund launched out into business world, and, concurrently it became the first private equity fund founded in the country. Another success story, Actera Group, which was set up in 2008, made its shining appearance in the market, and has whose assets under management now reached $1.5bn. Up to the present, over 70 private equity funds are on the lookout for profitable opportunities.

Macroeconomic conditions also provide an attractive environment for yield-oriented private equity funds. Following the historical Lehman Brothers’ failure, Turkey constrictedly suffered from the crisis. Moreover, it became the second-fastest growing economy after China with growth rate of 8.8% in 2011. With its economic power, Turkey drew the attention of the funds that are screening emerging markets for investments. Much more that 40 deals completed in 2011 and 2012, but, it looks like the ongoing upside trend line in mergers and acquisitions may be about to finish.

M&A Trend in Turkey - Marketmerger

Comparing to excellent results of 2011 and 2012, the number of deals we saw year-to-date is only 9, according to Marketmerger. As the recovery symptoms in developed world begin to become more clear, we see a sharp decrease in capital inflows towards emerging economies.  As might be expected, this is deteriorating the outlook of the PE market in Turkey. What is more, 2.2% growth rate, $5.8 billion current account deficit, fluctuating currency and the political unrest arising out of both domestic and foreign events are badly influencing the market.

The story of private equity funds in Turkey began perfectly, proceeded distinguishedly, but, recently it entered a rough era with some must-be-faced global challenges. Along with the current temporary inactivity in M&A market, Turkey will be an attractive market for both cross-border and domestic investors.