SPRING IN THEIR STEP

Turkey 2012 | ECONOMY | B2B: PRIVATE EQUITY

The year was punctuated by big deals and heightened interest. Private equity companies are now growing in confidence.

METE İKİZ
METE İKİZ
Investment Director
NBGI Private Equity
Selçuk Yorgancıoğlu
SELÇUK YORGANCIOĞLU
Senior Partner & Country Manager
Abraaj Turkey

How important is Turkey for your business?

METE İKİZ NBGI was originally established as a private equity (PE) and a venture capital (VC) Fund in London in 1999. The original idea was to establish a small fund of €100 million with which to make private equity investments in SMEs in the UK market, which was launched in June 2000. The UK Fund was quite successful with its investments, and the dedicated UK team was able to raise a second Fund of £100 million in 2007. The Emerging Europe team was established around five years ago, mainly focusing on Southeastern Europe (SEE). NBGI's Emerging Europe team today manages €300 million in committed and invested funds. Given the importance of the Turkish market in the SEE region, the Istanbul office was established in 2008. In addition to the Western European strategy, which includes the UK and France, and the Emerging Europe strategy, NBGI also manages a SEE-focused real estate Fund of €80 million and a technology VC Fund investing only in medical equipment companies in Europe with €120 million under management. NBGI's funds in total manage €900 million. We think that Turkey is by far the most important market in the SEE region, owing to its very dynamic and entrepreneurial population of 76 million people. Turkish companies are utilizing this advantage to penetrate into the region—including the Balkans, North Africa, the Middle East, and the former Soviet republics—and Turkey is strategically located as a base. Our strategy is to invest in SMEs and help them become regional powers.

SELÇUK YORGANCIOĞLU Turkey is a very important part of our geography and the Middle East, North Africa, and South Asia region. We have already established operations in Asia, and now we're seeking to expand further into global emerging markets. With the inclusion of Aureos Capital in the Abraaj Group, we have 150 companies in our portfolio in geographies starting from Latin America, Asia, Africa, Middle East, and Central Asia. Currently, we manage over $6 billion in assets, with approximately 350 people on our payroll drawn from 36 nationalities; we are a very diverse group. Turkey is one of our largest countries by GDP, differentiating itself with stability in comparison to the rest of the emerging markets and also Europe. This is a result of a single government implementing a very healthy fiscal and monetary policy in terms of the financial markets, as well as very disciplined political behavior both domestically and internationally. This is the root of the stability we've enjoyed in Turkey. The year 2011 was successful for Abraaj Capital, and we owned five well-established companies in the country. By the beginning of 2012, we were able to exit four of them, and our ability to implement an exit strategy in this market demonstrates the health of the economy and the political system in Turkey. This move also shows that we are able to select the right partners and corporates; we're very pleased. Turkey is located in a very unique location, with access to Central and Eastern Europe, the Middle East, and Southern Europe. We expect Turkey's importance to grow even more in the coming years.

How will the new Commercial Code help the private equity industry in Turkey?

Initially, people may be confused because the existing code dates back to 1958, which makes it very outdated for today's fast changing business world. The new one obliges companies to incorporate many new elements, such as having at least two independent board members. This is an extremely different approach for Turkish companies, especially for SMEs that are family owned. Previously, families were making the business decisions in the companies, but now they are obliged under penalty of law to have two independent board members influencing the decision-making process.

How would you characterize the appetite for foreign investment in Turkey?

SY The awareness of Turkish companies has increased significantly over the past seven or eight years, and we expect demand for our services to continue growing. Turkey boasts one of the best-regulated markets globally, with a very well-functioning Capital Markets Board and stock exchange, as well as a fast and diligent competition board. These are key for strategic merger and acquisition (M&A) transactions. The banking regulator is very cooperative, and these factors combined make Turkey a safe and easy environment for strategic investors to operate in. This explains the sizeable appetite of foreign investment in Turkey over the past few years.