session 4: the potential for private equity · session 4: the potential for private equity ......

Harman Sokak • Harmancı Giz Plaza Kat: 6 – 10 A No:20 • 34410 • Levent • Istanbul • TURKEY

Tel: +90.212.324.6060 • Fax: +90.212.324.5959

www.pragma.com.tr

Confidential

PRAGMA

Session 4: The Potential for Private Equity

11th

Turkish-Arab Economic Forum, İstanbul, 28 April 2016

N. Kerim Kotan

Managing Director

Pragma Corporate Finance

[email protected] / +90(532)4614833

PRAGMA

Pragma is the leading M&A advisory firm in Turkey

67 M&A transactions since 2005 (US$5 billion)

27 M&A bankers - the largest M&A team in Turkey

9 MDs - w/ 20 years of experience in M&A

Middle Eastern clients on the buy-side include Abraaj,

Averda, DP World, National Holding and Show Time

While on the sell-side, we have worked many times

with investors incl Abraaj, Global Investment House,

VC Bank, Sedco, East Gate, QFIB, NBK, Fajr, QInvest,

Olayan, Mubadala, Mayhoola, Alkhair, Investcorp,

PineBridge, QIA, Aabar, Alkhabeer, Arcapita, Dubai

International Capital, Gulf Capital, Oasis, UIB Bahrain

and Rasmala

Pragma vs competition

2

Source: Mergermarket

(*) intra-group advisory transactions and double counted transactions are eliminated

86%

14%

65%

29%

6%

2008 - 2016 (number of deals)*

Sell-side

Buy-side

Acquisition and Project Finance

Pragma completed deals breakdown

Foreign Investor

Domestic Investor

47 46 46

35

Pragma # 2 # 3 # 4

Unprecedented

Sell- & Buy-Side

Track Record

Long-standing

Local Relationships

Deep

Sector Experience

MD Level

Commitment

Independence

Continuous

Marketing & Deal

Sourcing

PRAGMA Transaction record of Pragma

PRAGMA

Turkish M&A at a glance (cont’d)

4

M&A deal volume and deal numbers in Turkey (2007 – 2015) (*)

(*) Adjusted for cancelled transactions

1) Average deal number

2) Average annual total deal size

Source: Deloitte Annual Turkish M&A Reviews, Mergermarket

19,3

16,2

5,2

17,3 15,0

22,0

17,5 18,0 16,4

160 169

101

190

237 253

215

234 245

-10

40

90

140

190

240

290

00

05

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Deal Size (US$ bn) Deal Number

229(1)

17.7(2)

mid 2008 – 2009

Global M&A

Downturn

2005 – mid 2008

major privatisations

& Bank sales

Despite the largely stalled

privatisation activity,

a good year. ca.30% from

Middle East

120

109

96

69

51

42

91

88

63

61

87

68

81

55

77

55

67

61

Avg. deal size

incl. priv’n

Avg. deal size

excl. priv'n

Avg deal size (US$mn)

PRAGMA


5

Privatizations (2007 – 2015) (*)

(*) Adjusted for cancelled privatizations and do not include SDIF sales

Source: Deloitte Annual Turkish M&A Reviews

19,3

16,2

5,2

17,3

15,0

22,0

17,5 18,0

16,4

2,3

5,2

1,2

2,9

1,0

6,4 6,6 5,9

1,8

12%

32%

23%

17%

7%

29%

38%

33%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Deal Value (US$bn) Privatizations (US$bn) Ratio to Total Deal Value (%)

22,4%

PRAGMA


6

Foreign Investors’ Share in Private Sector (excl privatisations) Deal Volume (2011 – 2015) (*)

(*) Include estimates for deals with undisclosed values


11,1

13,0

5,2

8,0

11,5

2,9

2,3

5,3

3,7

3,1

79%

85%

50%

68%

79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

2

4

6

8

10

12

14

16

18

2011 2012 2013 2014 2015

Foreign Investors (US$bn) Turkish Investors (US$bn) Foreign Investors' Share (%)

PRAGMA


7

Financial Investor Activity (2007 – 2015) (*)



19,3

16,2

5,2

17,3

15,0

22,0

17,5 18,0

16,4

2,3

4,9

0,7 0,9 1,2 1,6 2,1 2,1

3,1

12%

30%

13%

5%

8% 7%

12% 12%

19%

0%

5%

10%

15%

20%

25%

30%

35%

0

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Deal Value Financial Investors' Deals Ratio to Total Deal Value

PRAGMA


8

Sectoral overview (2011 – 2015) (*)



Deal value (%)

2011 2012 2013 2014 2015

Energy 21% 31% 47% 32% 38%

Manufacturing 4% 2% 6% 5% 2%

Food & Beverage 21% 9% 6% 4% 2%

Financial Services 8% 19% 13% 20% 28%

Retail 5% 1% 5% 6% 5%

Others 41% 38% 24% 33% 26%

PRAGMA

M&A Deals with Middle Eastern Investors (I / VII)

9

Deal Highlights

Date Target Company Target Sector Bidder Company Bidder Country Stake sold

(%)

Deal Value

(US$ mn)

Mar-16 Ergo Portfoy Yonetimi Financial Services QInvest LLC Qatar 100% -

Feb-16 FlightRecorder Computer

software

ClickTale Ltd. Israel 100% -

Dec-15 Finansbank Financial Services Qatar National Bank Qatar 100% 2,992

Dec-15 Oruçoğlu Yağ Consumer: Foods Trans-Atlantic Group DMCC UAE 100 -

Oct-15 Linkplus Bilgisayar

Sistemleri

Computer:

Hardware

Redington Gulf FZE UAE 70% 6

Aug-15 Yu-Ce Tibbi Gereçler Medical Abraaj Capital Holdings Limited UAE n.a. -

Jul-15 Ventus Enerji Yatirimlari Energy ACWA Power International Saudi Arabia 100% 9

Jul-15 DigiTurk Media beIN Media Group Qatar 100% -

Jun-15 Akdeniz Insaat ve Egitim

Hizmetleri

Construction International Trading & Contracting

Company W.L.L.

Qatar 100% -

May-15 Mektebim Okullari Services (other) SEDCO Holding Group Saudi Arabia 50% 43

Apr-15 Altinyildiz Mensucat Manufacturing

(other)

Mayhoola for Investments S.P.C Qatar 31% 327

Apr-15 CBKSoft Software Computer

software

InfoFort Holdings Limited UAE 51% 8

Mar-15 Olgarlar Consumer: Retail Global Capital Management Kuwait n.a. -

Feb-15 Modanisa Consumer: Retail STC Ventures UAE n.a. 6

Feb-15 Hepsiburada.com Internet /

ecommerce

Abraaj Capital Holdings Limited UAE 25% 100

Feb-15 Kontes Beach Hotel Leisure Nasser Ahmed Ali A. Al Thani

(private investor)

Qatar 100% 8

Source: Mergermarket, Deloitte Annual Turkish M&A Reviews

PRAGMA

M&A Deals with Middle Eastern Investors (II / VII)

10

Deal Highlights


(%)

Deal Value

(US$ mn)

Feb-15 Arvento Telecommunicatio

ns: Hardware

Investcorp Bahrain 100% -

Feb-15 Yaliz Chemicals and

materials

Gulf Cryo UAE 100% -

Feb-15 BRN Yatak Manufacturing

(other)

EBRD; Abraaj Capital Holdings

Limited

UAE;UK minority -

Dec-14 DigiTurk Media Sheikh Al-Khalifa (Private Investor) Qatar 53% -

Nov-14 Çelik Tekne Tersanesi Services (other) Kuzey Star Shipyard Denizcilik Jordan 100% 13

Nov-14 Sistem-9 Medya Computer

software

NBK Capital Equity Partners Fund II

L.P.

Kuwait 51% 20

Nov-14 Seker Pilic Consumer: Foods Auckland Investment Group UAE 70% 15

Oct-14 Armada Bilgisayar Computer:

Hardware

Aptec Holdings Ltd UAE 58% 24

Aug-14 Munir Sahin llac Medical:

Pharmaceuticals

SBK Holding UAE 100% -

Aug-14 Deniz Gaz Chemicals and

materials

Gulf Cryo Holding C.S.C UAE n.a. -

Mar-14 BMC Defence Qatar Armed Forces Industry

Committe

Qatar 50% -

Mar-14 Yatsan Consumer: Retail NBK Capital Kuwait 78% -

Mar-14 Romatem Medical PineBridge Investments Middle East

B.S.C.

Bahrain 50% -

Mar-14 Panco Giyim Consumer: Retail Levant Capital Limited UAE majority -

Feb-14 Agatur Turizm Yatirimlari Real Estate Abduljawad Group Saudi Arabia 100% 80

Jan-14 Avrupa Goz Hastanesi Medical ReAya Holding; Nesmal Yatirim

Holding AS

Saudi Arabia,Turkey;Saudi

Arabia

50% 24


PRAGMA

M&A Deals with Middle Eastern Investors (III / VII)

11

Deal Highlights


(%)

Deal Value

(US$ mn)

Jan-14 Namet Gida Consumer: Foods Investcorp UAE,Bahrain,UK,Saudi

Arabia,USA

minority -

Nov-13 Yorsan Gida Mamulleri Consumer: Foods EBRD; Abraaj Capital Holdings

Limited

UAE;UK 80% -

Nov-13 Cemre Insaat Plastik Su

Urunleri

Construction Jadwa Investment Company Saudi Arabia 37% 100

Aug-13 Republika Academic Aparts Leisure Abraaj Capital Holdings Limited UAE n.a. -

Jun-13 Benal Danismanlik Energy Aswar National Group Kuwait n.a. -

May-13 Onur Air Transportation Kudret Tuncel (Private investor);

Mahdi Shams (Private investor)

Turkey;UAE,UK 70% 250

Apr-13 Park Bravo Consumer: Retail The Landmark Group UAE 88% -

Apr-13 Sisli Optik Consumer: Retail Magrabi Optical Company Ltd. Saudi Arabia 100% -

Apr-13 Dogu Tıp Merkezi Medical Techno Group Investment Holdings /

Gulf Capital

UAE 75% 11

Mar-13 Alternatifbank Financial Services Commercial Bank of Qatar (Q.S.C.) Qatar 75% 473

Feb-13 Park Bravo Consumer: Retail The Landmark Group UAE 88% -

Oct-12 EHM Magazacilik / English

Home

Consumer: Retail Qatar First Bank Qatar 40% -

Sep-12 Dubai Group Sigorta Financial Services Oman Insurance PSC; Starr

Insurance & Reinsurance

UAE;Bermuda 100% -

Sep-12 Toyotasa Toyota-Sabanci

Pazarlama ve Satis

Automotive ALJ Lubnatsi Pazarlama ve Satıs

A.S.

Saudi Arabia 35% -

Jul-12 Dank Gıda Consumer: Foods Dallah Al Baraka Saudi Arabia 50% -

Jul-12 Orka Group Consumer: Retail Investcorp Gulf Opportunity Fund Bahrain 30% -


PRAGMA

M&A Deals with Middle Eastern Investors (IV / VII)

12

Deal Highlights


(%)

Deal Value

(US$ mn)

Jun-12 Bavet Ilac Medical:

Pharmaceuticals

NBK Capital Kuwait 50% 9

Jun-12 SDS Enerji Construction Dhabi One Investment Services LLC UAE 18% 10

Jun-12 Orion Holding Services (other) Gulf Capital UAE 20

Apr-12 Eurobank Tekfen Financial Services Burgan Bank Kuwait 99% 356

Mar-12 Viking International Energy Abraaj Capital Holdings Limited;

Dalea Partners, LP

UAE;USA 100% 167

Feb-12 GOKNUR Foods Consumer: Foods Bank Alkhair B.S.C.; Venture Capital

Bank

Bahrain;Bahrain 65% 50

Jan-12 Dem Ilac Medical:

Pharmaceuticals

NBK Capital Mezzanine Fund I Kuwait n.a. -

Jan-12 Silk and Cashmere Consumer: Other Eastgate MENA Direct Equity LP UAE 45% 14

Dec-11 Pelit Su Consumer: Other Emirates Foodstuff & Mineral Water

Company

UAE n.a. -

Oct-11 Delta Petroleum Services (other) Med Energy Holding SAL; Delta

Rubis SA

France;Lebanon 100% -

Oct-11 P.I. Works Computer

software

Riyada Enterprise Development Egypt,Jordan 100% 30

Sep-11 Kumport Liman Transportation State General Reserve Fund Oman 35% -

Aug-11 Banvit Consumer: Foods Aabar Investments PJSC UAE 16% 45

Aug-11 Adabank Financial Services G Capital Limited; Gurmen Group UAE;Turkey 100% 75

May-11 Cafe Crown Consumer: Retail Al Sayer Kuwait 50% 7

May-11 Assan Tuketici Finansmani Financial Services ALJ Lubnatsi Pazarlama ve Satıs Saudi Arabia 100% 25


PRAGMA

M&A Deals with Middle Eastern Investors (V / VII)

13

Deal Highlights


(%)

Deal Value

(US$ mn)

May-11 Yargici Consumer: Retail Global Buyout Fund LP Cayman Islands,Kuwait 75% 50

Feb-11 Cine5 Media Al Jazeera Qatar 100% 41

Feb-11 Bicakcilar Medical Global Buyout Fund LP Cayman Islands,Kuwait 80% 106

Dec-10 Kilic Deniz Urunleri Consumer: Foods National Bank of Kuwait S.A.K. Kuwait 20% -

Dec-10 Kilic Deniz Urunleri Consumer: Foods Statum SRL Kuwait 25% -

Sep-10 Tiryaki Agro Consumer: Foods Investcorp Gulf Opportunity Fund I Bahrain n.a. 50

Aug-10 Memorial Health Group Medical Argus Capital Group Limited; Qatar

First Bank

UK;Qatar 40% 120

Jul-10 Hobi Kozmetik Consumer: Other Dabur International Limited UAE 100% 69

May-10 Munamar Hotel Leisure Al - Maselah Qatar 100% 15

May-10 Constab Middle East

Polimer

Chemicals and

materials

Astra Polymers Compounding Co

Ltd

Saudi Arabia 100% 7

Nov-09 Ekol Lojistik Transportation Invest AD Private Equity Partners II UAE n.a. 75

Aug-09 Toyotasa Toyota-Sabanci

Pazarlama ve Satis

Consumer: Retail ALJ Lubnatsi Pazarlama ve Satıs

A.S.

Saudi Arabia 65% 85

Aug-09 Elimsan Group Industrial:

Electronics

Saudi Cable Company Saudi Arabia 79% 33

May-09 Fleetcorp Taşıt Kiralama Financial Services The International Investor Kuwait 25% -

May-09 Isotlar Group Automotive Mayer's Cars and Trucks Co Ltd Israel 49% -

Feb-09 Emaar Turkey Real Estate Emaar Properties PJSC UAE 40% -


PRAGMA

M&A Deals with Middle Eastern Investors (VI / VII)

14

Deal Highlights


(%)

Deal Value

(US$ mn)

Jan-09 Taftel Tafting Consumer: Other Intaj Capital Saudi Arabia 46% -

Aug-08 Numarine Consumer: Other Abraaj Capital Holdings Limited UAE 50% -

Jul-08 Turk Tuborg Consumer: Other Central Bottling Company Ltd Israel 96% 167

Jul-08 Step Halicilik Manufacturing

(other)

Swicorp Saudi Arabia 40% -

Jul-08 Demas International Transportation Gulftainer Company Limited UAE 50% 16

Feb-08 Keyland Turizm Leisure Naguib Mikati (private investor) Lebanon 100% 12

Feb-08 ACT Airlines Transportation Manara Investments Ltd Saudi Arabia 21% -

Dec-07 Fon Sinai Yatirimlar Financial Services Global Investment House KPSC Kuwait 60% 418

Nov-07 Yudum Food Consumer: Foods Afia International Saudi Arabia 100% 71

Nov-07 Acibadem Financial Services Abraaj Capital Holdings Limited UAE 50% -

Aug-07 Acibadem Medical Abraaj Capital Holdings Limited UAE 22% 163

Jul-07 Turkish Bank Financial Services National Bank of Kuwait S.A.K. Kuwait 40% 160

Jul-07 Turkiye Finans Katilim

Bankasi

Financial Services The National Commercial Bank Saudi Arabia 60% 1,080

May-07 Yudum Food Consumer: Foods NBK Capital Kuwait 100% -

Sep-06 Inter Yatirim Menkul

Degerler

Financial Services Bank Alkhair B.S.C. Bahrain 75% 6


PRAGMA

M&A Deals with Middle Eastern Investors (VII / VII)

15

Deal Highlights


(%)

Deal Value

(US$ mn)

Sep-06 Turkland Bank Financial Services Arab Bank Group; BankMed Jordan;Lebanon 91% 160

Jul-06 Adabank Financial Services The International Investment

Bank of Kuwait

Kuwait 100% 28

Jun-06 Atlas Hali Manufacturing

(other)

Carmel Carpets Israel 50% 9

May-06 TAV Transportation Goldman Sachs; Babcock & Brown

Ltd; Islamic Development Bank

Australia;USA;Saudi Arabia n.a. 388

Dec-05 Bank Pozitif Financial Services Bank Hapoalim BM Israel 58% 100

Dec-05 Yarimca Transportation DP World Limited UAE 100% 105

Aug-05 Turk Telekomunikasyon Telecommunicatio

ns: Carriers

Oger Telecom UAE 55% 6,550

May-05 Docar Operational Filo

Kiralama

Financial Services The International Investor Company

KSCC

Kuwait 75% 29

May-05 Izmir Demir Celik Sanayi Industrial products Global Steel Holdings Limited UAE 55% 78


PRAGMA

Middle East – outbound M&A

16

Top 20 Target Countries(1) (2011 – 2015), mln$

(1) Ranking based on 2015 volume

(2) Source: Mergermarket, Pragma estimates on undisclosed deals for 2015 only, includes Digiturk – not yet closed

# Country 2011

Value 2012

Value 2013

Value 2014

Value 2015

Value 2011

Volume 2012

Volume 2013

Volume 2014

Volume 2015

Volume

1 UK 658 3,761 1,672 2,438 5,492 18 17 17 16 19

2 Turkey 372 626 584 563 3,499 9 12 9 12 17

3 Spain 10,629 381 63 3,300 3,023 4 3 2 8 12

4 USA 350 365 335 605 2,627 8 6 7 6 9

5 Germany 173 4,397 2,816 93 5,815 4 8 11 5 5

6 France 89 89 0 410 2,253 4 8 5 6 5

7 Israel 112 1,181 19 210 216 3 4 3 5 5

8 Netherlands 60 0 206 0 120 2 1 4 2 3

9 Austria 1,231 0 0 44 395 2 1 1 2 3

10 Belgium 0 0 50 0 0 1 1 1 0 3

11 Egypt 0 3,076 22 10 350 0 3 1 1 3

12 Italy 147 889 197 2,143 0 4 2 1 14 2

13 China 5 1,648 126 0 400 1 2 1 0 2

14 India 33 9 18 794 35 1 1 1 4 2

15 Poland 5 1 0 0 21 1 1 0 0 2

16 Saudi Arabia 0 100 72 0 8 0 2 6 2 2

17 United Arab Emirates 371 3 697 177 0 3 3 6 4 1

18 Ireland (Republic) 0 44 0 0 40,500 2 2 1 0 1

19 Canada 137 0 987 2,215 457 1 0 1 3 1

20 Morocco 158 0 6,100 0 0 1 0 1 1 1

Other 1.387 6.605 5.825 8.094 11.874 16 26 22 25 13

Total 15.917 23.175 19.789 21.096 77.085 85 103 101 116 111

« Turkey as % of total outbound M&A 2,3% 2,7% 3,0% 2,7% 4,5% 10,6% 11,7% 8,9% 10,3% 15,3%

#3 #7 #6 #7 #4

$5 bln(2)

PRAGMA

Is the current environment in Turkey advantageous to M&A?

17

Deal flow is more than alive on the small- and mid-cap!

Robust rates of growth over the long-run (4.2% in 2015)

USD800 billion GDP and >USD10K per capita income

Half of the 79 million population is below the age of 35

A rising middle class with resilient appetite to consume and

low-private saving rate (credit growth, depreciation, int rates,

refugees, oil prices)

industries/experience from basic manufacturing to

sophisticated fin services

Well-run family businesses with strong entrepreneurial culture

Continued single-Gov’t stability + pro-FDI Gov’t

Economic/structural reforms to help continuing the growth

story, supported by long-term strategi aim of “the full

membership to the EU“

Quality of the country’s institutions as well as the rule of law will

be strengthened

Geopolitical tensions (Syria, Russia, Iraq, Israel etc)

Conventional export markets underperforming

Continued terrorism/security risk

Internal political tensions

Tourism industry in bad shape

Capital outflows from all emerging markets

High current account deficit + large external financing need

meanexposure to external shocks

PRAGMA The most and the least attractive sectors from Private Equity

investment point of view?

18

Casual Dining and QSR chains

Branded fashion retail

Other non-food retail

Food & Beverages

Healthcare and Pharma

Infrastructure

Services

Logistics

Chemicals

Financial and accounting software

Value-added manufacturing

Tourism

Education

Financial Institutions

Telecoms

Energy

Media

Consumer electronics

Construction

Textiles

Consulting

PRAGMA

Deal sourcing – Where?

19

The Target Company has a proven asset, established market share, resilient business, good

financials, seasoned owner/management etc. but at the same time the business faces

– Lack of equity or debt (because too conservative) capital to grow

– A highly levered balance sheet crippling further growth

– Shareholder conflicts

– Succession issues at the shareholder/CEO level

Owner simple wants to exit to do something else, move and/or retire – transformation period,

new CEO/Management? – Turkey has excellent mid-level management but C-level is a bit

challenging

Divestments of non-core businesses by conglomerates restructuring their portfolios – it’s not

always «just» restructuring – best to scrutinise why they are «really» selling

Exits by other Private Equity players; more than 20 good businesses are already on/will come

on the sale block in 2016-2017

PRAGMA

Typical challenges PEs face in Turkey?

20

Defensiveness of owners letting go control

Unrealistic valuation and/or corporate governance expectations of the sellers

Numbers not adding up, two-three different books running at the company

Owners are mostly not familiar with the concept of increasing shareholder value

Owners not willing to be dragged at exit and asking for unrealistic exit rights

Scarcity of bilateral deals - almost always some level competition

Limited availability of target-level acquisition finance

PRAGMA

Deal sourcing - How?

21

Deal sourcing and execution revert to the skills of seasoned deal makers

Passive processing of deal flow does not work – already too late for competitive

positioning

Need to be on the ground meeting owners, monitoring the shifting dynamics

Broad network of “personal” and “intimate” relationships with the owners/sellers

Auctions are today’s reality; “prop” deals are not impossible but challenging

Hence, any past relationship you may have with the seller & banker becomes

vital

Continuous relationships and strategic dialogue with other key decision makers

also necessary

Your reputation in Turkey is not based on your corporate size or track record

elsewhere but rather on what you have done in Turkey and how you are

personally perceived in terms of your capabilities and power

session 4: the potential for private equity · session 4: the potential for private equity ......

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