Global Business Reports on behalf of bne -

Mergers and acquisitions in Turkey were booming until the global economic crisis hit. Now the economy is coming out the other side, corporate finance is back on the agenda and investment bankers are rolling up their sleeves.

"Up until 2008, there was huge interest from foreign investors, but since the recession these companies now care more about their own interests, so the relative demand for cross-border M&As, especially for large-sized transactions, has decreased," CEO of Garanti Securities Metin Ar explains.

The total volume of M&A in 2009 stood at $5.8bn, a fall of 64% from the year earlier, while the number of transactions fell by 40%. At the same time, the share of foreign investment in that fell by 38%.

But things are starting to pick up. There have been 15 transactions so far this year, most spilling over from last year, and there are more in the pipeline. İş Private Equity CEO Murat Özgen sees growth in the mid-market segment (€15m-60m) developing. Deloitte Turkey Managing Partner Hüseyin Gürer is also optimistic: in January, his firm was predicting M&A worth $10bn for 2010.

State sales

The government's privatisation strategy has been an important contributor to M&A activity over the last few years and is the cause of a new wave of activity in the market this year. In the second quarter, around 70% of M&A was concentrated in the energy sector, thanks to the privatisation of distribution networks and power plants. And the government wants to also privatise natural gas distribution grids, highways, the National Lottery, sugar factories and Halkbank this year.

Once the last wave of privatization is complete, the market will have to rely on private deals and it's possible that M&A volumes won't reach the volumes seen in 2006-2008 again, at least in the short term. Even so, the need for investment by private companies is growing. "As the domestic economy increases and companies want to become global, they acquire a different vision and different type of financial need," says Özgen.

Recognizing the trends in the current market, many corporate finance providers are looking to focus on small and medium-sized deals. "Our revenue coming from corporate management is very volatile yearly, since we have focused on big deals so far. We are now planning to increase our efforts on mid-sized deals," confirms EFG Securities' chief economist, Baturalp Candemir.

Public-private partnerships (PPP) are likely to be a big growth area in the future as Turkey upgrades its infrastructure. A new law is set to come into effect to standardize projects, starting with the healthcare sector.