Guy Norton in London -
Turkey is increasingly emerging as a new frontier market for private equity, with industry insiders saying the country possesses all the positive traits for such investment - a young and growing population, a deep pool of managerial expertise, expanding trade links, an economy that is opening up, and fast developing capital markets.
Among the latest deals, Rhea Investments has acquired a majority stake in medical supplies firm Seta Medical Products. Seta is Turkey's leading manufacturer of disposable medical products, including disposable surgical drapes and gowns, and custom procedure trays. The proposed transaction values SETA Medical at $4.6m. "Healthcare is one of the fastest growing and most vital sectors in Turkey and globally. Disposable medical products are a global $75bn market poised for strong growth," says Onur Takmak, chief executive of Rhea Investments. "Seta represents the leading edge of value-added healthcare products and is our initial investment in innovative healthcare companies with regional and global growth aspirations."
Rhea has also bought 60% of software company Netsafe Information Technologies in a deal that values NetSafe at around $1m. Both transactions were made via Venture Capital Investment Trust VakÄ±f Girisim, the Istanbul Stock Exchange-listed investment vehicle that Rhea acquired last September. VakÄ±f Girisim, founded in 1996, is widely regarded as one of the pioneers of the private equity and venture capital industry in Turkey.
In December, US private equity giant Carlyle took a 40% stake in healthcare group Medical Park Saglik Hizmetleri and is reported to be in talks to purchase stakes in two other Turkish companies. Established in 2005, Medical Park has become Turkey's second-largest healthcare services company. It owns and operates 13 hospitals with 2,000 beds. "The Turkish healthcare services sector shows great promise as patient demand for services has been high and is expected to grow steadily," says Can Deldag, who heads Carlyle's Turkish investment team.
Carlyle first entered the Turkish private equity market in 2008, buying 50% of TVK Shipyard, which builds chemical tankers and other specialty vessels.
Other recent private equity transactions in Turkey include the €50m purchase of a minority position in stake in Turkish logistics company Ekol Lojistik by Abu Dhabi-based investment firm Invest AD (formerly Abu Dhabi Investment Company). The transaction was the first by the firm's latest private equity fund - Invest AD Private Equity Partners II. The investment was structured in the form of a capital increase to assist EKOL fund its expansion plans. "Our investment is perfectly in line with Invest AD's private equity strategy of partnering with local market leaders and assisting them in their regional expansion," says Samir Assaad, head of private equity at Invest AD. "We believe Ekol is unique in its sector, differentiated by its focus on innovative and customised solutions. It's very well managed and expanding quickly as trade grows in Europe and the Middle East."
Invest AD's private equity fund, which aims to raise $400m, is investing in fast growing companies in the Middle East and North Africa region, with a strong focus on Turkey, Saudi Arabia, Egypt and the United Arab Emirates. "Turkey has all the most positive traits for investment found in our region - a youthful and growing population, a deep pool of managerial expertise, expanding trade links, an economy that is opening up and fast developing capital markets," says Nazem Fawwaz Al Kudsi, Invest AD's chief executive.
Ekol, established in 1990, owns and operates 1,100 vehicles and 16 warehouses in Turkey and a dock facility in Germany, serving a mix of international and national blue-chip clients. Umur Ozkal, Ekol's chief executive says the company will mostly use the new capital to develop warehousing operations, but would also consider minor acquisitions to expand its international transportation business. "Ekol now has a strong balance sheet and capital structure, and our aim is to continue developing our road transportation business and investing in technology-based warehousing solutions for our clients," says Ozkal. "We've already built a strong brand and are in prime position to take advantage of Turkey's pivotal location in international trade flows," he added.
Meanwhile, UK outfit Bridgepoint Capital bought a 33% stake in vehicle inspection group TuvTurk. Bridgepoint cited the long-term growth potential of the business, driven by growing car ownership in Turkey and compulsory testing enforcement increasing towards EU norms as key factors in the acquisition. The investment was made through its €4.85bn Bridgepoint Europe IV fund.
TuvTurk was established in 2005 when a consortium comprising TUV SUD, a German vehicle and industrial inspection business Tuv, Turkish infrastructure operator Akfen, and Turkish conglomerate Dogus won a tender from the Turkish government fora 20-year concession to operate vehicle inspection stations in Turkey. The company operates 189 stations across the country and has franchised its operations across 81 regions to 46 franchisees. According to Martin Dunn, a director of Bridgepoint's Turkish investment team, TuvTurk is a high-quality, cash-generative, stable business with long-term growth potential as enforcement of compulsory testing converges toward EU norms and car ownership levels increase. "TuvTurk is a robust business in a growing sector with a high-performing management team and institutional shareholders who understand the vehicle inspection and domestic Turkish automotive markets extremely well," says Dunn.
Both transactions were closed in October, the same month that the European Bank for Reconstruction and Development (EBRD) announced it was mulling a €10m commitment to a planned fund by Eurasia Capital Partners (ECP), which specializes in buyouts of small and medium-sized enterprises (SMEs) in Turkey. ECP is targeting a €60m close for its fund, which the EBRD hopes will contribute to the development of sophisticated financial intermediation and the provision of additional sources of long term risk capital to SMEs in the country.
Finally, in another cross-border link-up, Istanbul Venture Capital Initiative (iVCi) has teamed up with 3TS Capital Partners, an emerging Europe-focused private equity firm, in a €6m co-investment to help support 3TS' investments in the Turkish technology, media and telecommunications (TMT) sector. Pekka Maki, 3TS Capital Partners' managing director, says: "iVCi's support allows us to better address the needs of the TMT sector in Turkey where there is a significant pipeline of investment opportunities."
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