DÜNYA WEB - Private Equity Funds Have Raised 1 Billion Dollars in 1 Year [Translation from its Turkish Original]
Barış Öney, Managing Partner of Globalturk Capital has said that “Research we have made shows that, 62 percent of the foreign direct investment inflow in Turkey made in the last 10 years was driven by private equity funds”.
Barış Öney, Managing Partner of Globalturk Capital has said that, fresh money brought into Turkish private equity funds in the last 1 year have reached 1 billion dollars. While pointing out that such an investment had been brought in the year 2012 previously, Barış Öney has predicted that the next boomer will arrive in 2020.
We have talked about the developments in the private equity world recently with Barış Öney, Managing Partner of Globalturk Capital, who provided financial advisory for the project financing of Tunçmatik’s solar energy project of 73 megawatts. While pointing out that “capital wars” are being experienced in the world, Barış Öney has emphasized that countries to improve the investment environment the most going forward shall be discriminated positively. Having mentioned that in terms of the geography where it is located, Turkey has a profile which the investors cannot ignore. Öney has said that “Almost 2/3rd’s of the world’s population lives in emerging markets where we are also included in. 3/4th’s of the world’s GDP (Gross Domestic Product) and its growth comes from these countries. Thus, no investor can turn a blind eye on these countries. The more you become a stable country, the more you attract investments”.
Having emphasized that, despite the shocks experienced in the last one year, 1 billion dollars of fresh money has been brought into the Turkish private equity funds, and this inflow is very important, Öney went on to say that “figures of this inflow in Turkey were more than the figures flew into the Central and East Europe and Middle East. Turkey has attracted the best investment flow of the last 5 years. Private equity exits on the other hand, some of which were realized through initial public offerings, may trigger new inflows. The next boomer will possibly occur around 2020. Private equity investor is an investor in the field, and differs from a stock exchange investor. They make investments for 5 to 7 years focusing on companies. It has a micro perspective, not a macro one. If the country is stable and the company is promising a growth, problems in the region do not decrease the investment appetite of the private equity investor.
Having stated that there are many companies in Turkey which have become a power force in their region and which proceed in this path, Öney has commented that “Turkey is the largest production base in the field from Western Europe to China. Furthermore, production range in Turkey is very large. Moreover, we are at a much better position than India in this respect. At this very point, Barış Öney has made a warning. Having mentioned that the world is very unstable and the developments in the USA in relation to Trump are creating uncertainty. Öney went on to say as follows: “In 1990’s, when we attended one-hour investor meetings during roadshows, we were talking about Turkey’s economy for 55 minutes, and about the company only for 5 minutes.
This has changed after 2004 with the EU membership process and reforms. We have departed from talking about Turkey, and shifted towards promoting companies. Now, we are once again talking about Turkey with the investors. The world is unstable, and no one knows how the developments in relation to Trump will turn out to be. 10 years later, Turkey will have enormous global companies. There are deep-rooted companies in Europe with brands of hundred years that the new generations do not want to maintain. The next step for Turkish companies is to grow by making acquisitions, and Barış Öney, Managing Partner of Globalturk Capital has said that “Research we have made shows that, 62 percent of the foreign direct investment inflow in Turkey made in the last 10 years was driven by private equity funds”. They have entered into portfolios of family offices also. Having stated that private equity funds have started to receive investments from Turkish family offices, Barış Öney has said that Turkish Family Offices have a share of 5 to 10 percent within the total portfolios of these funds, and likewise, Turkiye Wealth Fund can also act as a private equity fund.
Öney has said that, “investments abroad by the Turkiye Wealth Fund to add value to Turkey is likely to become a very important move. Large sovereign wealth funds of the world also act with this understanding. If we talk about industry 4.0, and if we wish to make technology investments, certain sum of investments can also be made in the companies that have attained their maturity in the Silicon Valley. Turkiye Wealth Fund can also act with the same understanding of a private equity fund”. This understanding can be to offer the growth story to the funds which will support them in their investments.
New growth story, acquisitions
Having emphasized that, in order to attract private equity funds, it is necessary to present a growth story which will increase their appetite, Öney has continued as follows: “Turkish companies are doing very well, and private equity funds are also flowing in, but it is necessary to present stories representing a 3 to 4 times real growth. It is not easy to present such a story. It is not sufficient to grow only by adding a one more line to the existing production line. Such growth can be possible only by acquiring companies in Turkey and in the world. Turkish business community is required to learn how to grow by acquisitions companies. And as a matter of fact they are in the process of learning it... Especially for the last few years, we are witnessing Turks acquiring companies abroad. And investment flows from private equity funds to the companies creating stories for growth in their country and region. This is also the engine of the rapid growth of Turkey”.
He pointed out that, now more private equity funds inquire from the company, their intentions in acquiring other companies for growth. Öney has said that “Investors want them to be the leader of their sector or region. Even if they are not, investors want to see that they at least act with this vision. The point where Turkish industry has difficulty the most starts here. The main trigger of attracting more growth and funds is to form the correct growth strategy this way.”
“It is necessary to explain this not to the CEO, but to the board of directors”
Having told that direct investments in the world are being made by private capital funds, Öney, has explained that “Researches we have made show that, 62 percent of the foreign direct investment inflow in Turkey made in the last 10 years is funded by private equity funds. When you look at the investor structures of the companies making Direct Capital Investments in our country, you mostly see a private capital fund. In Turkey, we look at these companies and see a strategic purchase, but there is a fund in their decision making authority. Thus, in order to attract more investments, it is of importance to reach out and explain it to not only the CEO’s of multinational companies, but also to the private capital funds making investment in these companies, their boards of directors and investment authorities”.
Emerging markets are not the competitors of Turkey
Having said that, “Our competitors in fundraising are no longer emerging markets”, Barış Öney has said that, “After Lehman crisis in 2008-2009, asset prices in Europe and USA have decreased so much that, all these funds have become investors for developed countries. Now in the last 6 to 7 years, they have made 4 to 5 times returns from such investments they have made. During this period, assets of emerging markets have lost their charm from the viewpoint of funds. Now, this atmosphere is changing. The atmosphere is changing, but the funds are seeking new investments from the point of view of these returns that they have attained. Thus, while seeking companies to make new investments, they look with an appetite for making 3 to 4 times real returns.
“Public offering of Mavi was a benchmark”
Barış Öney has also emphasized that, as much as entry investment of a fund, the market conditions where the fund may implement its “exit” strategy by which it will realize its investment in that country and switch to another investment, are also important. Having also emphasized that each exit means more funds and provides important signals for that market, Öney has mentioned that 3 different exit strategies can be implemented in Turkey including public offerings.
Having emphasized that, for example, exit of Turkven from Mavi by way of initial public offering was a benchmark transaction, Öney has said that “We see that funds have difficulty implementing such successful exits in China and India. It is very important to be able to offer this exit environment to investors.” In the last 1 year, Mediterra has exited from Logo, ADM Capital has exited from Cevher, Providence Capital has exited from Digiturk, Darby has exited from Hisarlar, and Actera and Esas have exited from Mars Cinemas.
South - South concept
Having described certain acquisitions made recently as South - South concept, Öney has mentioned that, now more Indian, Korean and Brazilian companies are making acquisitions in the Turkish market. Having explained that, having been in the position of a host country once, emerging markets of Asia are now appearing on the world’s stage as buyers themselves, Öney has stated that, “Not only Europeans and Americans, but also Koreans are now acquiring. Hereinafter, maybe Turks shall make acquisitions in India.”
They have entered in portfolios of family offices
Having stated that private equity funds have started to receive investments from Turkish family offices, Barış Öney has said that Turkish Family Offices have a share of 5 to 10 percent within the total portfolios of these funds, and likewise, Turkiye Wealth Fund can also act as a private equity fund. Öney has said that, “an investment abroad by the Turkiye Wealth Fund to add value to Turkey would be a very important move. Large sovereign wealth funds of the world also act with this understanding. If we talk about industry 4.0, and if we wish to make technology investments, certain sum of investments can also be made in the companies that have attained their maturity in the Silicon Valley. Turkiye Wealth Fund can also act with the same understanding of a private capital fund”.
Turkey is becoming the meeting ‘hub’ of global private capital industry
In the past few months, Barış Öney, who also has taken the task of Turkey representative of the Emerging Market Private Equity Association (EMPEA) based in Washington DC, has said that the private equity funds briefing, which was held in December last year in Istanbul, will be held this year again in December. Having pointed out that the total size managed by EMPEA members is more than 1 trillion dollars, Öney has said that “Turkey has started to become the meeting hub of global private equity funds”.
Öney has given the following information: With the conferences held every year traditionally in May in Washington and in October in London, Turkey has become the third meeting point of trillion dollars of funds for the last 2 years. At the same time, our efforts in this respect have created awareness on the EMPEA side, and EMPEA has for the first time switched to country representation model with us. Having been unable to secure even a panel place in the previous years due to scale and investor’s interest, Turkey is now attracting serious interest. Perception of Turkey by these funds is far beyond the political developments.