Session 4: The Potential for Private Equity · Session 4: The Potential for Private Equity ......
Transcript of 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$5 billion)
27 M&A bankers - the largest M&A team in Turkey
9 MDs - w/ 20 years of experience in M&A
Middle Eastern clients on the buy-side include Abraaj,
Averda, DP World, National Holding and Show Time
While on the sell-side, we have worked many times
with investors incl Abraaj, Global Investment House,
VC Bank, Sedco, East Gate, QFIB, NBK, Fajr, QInvest,
Olayan, Mubadala, Mayhoola, Alkhair, Investcorp,
PineBridge, QIA, Aabar, Alkhabeer, Arcapita, Dubai
International Capital, Gulf Capital, Oasis, UIB Bahrain
and Rasmala
Pragma vs competition
2
Source: Mergermarket
(*) intra-group advisory transactions and double counted transactions are eliminated
86%
14%
65%
29%
6%
2008 - 2016 (number of deals)*
Sell-side
Buy-side
Acquisition and Project Finance
Pragma completed deals breakdown
Foreign Investor
Domestic Investor
47 46 46
35
Pragma # 2 # 3 # 4
Unprecedented
Sell- & Buy-Side
Track Record
Long-standing
Local Relationships
Deep
Sector Experience
MD Level
Commitment
Independence
Continuous
Marketing & Deal
Sourcing
PRAGMA
Turkish M&A at a glance (cont’d)
4
M&A deal volume and deal numbers in Turkey (2007 – 2015) (*)
(*) Adjusted for cancelled transactions
1) Average deal number
2) Average annual total deal size
Source: Deloitte Annual Turkish M&A Reviews, Mergermarket
19,3
16,2
5,2
17,3 15,0
22,0
17,5 18,0 16,4
160 169
101
190
237 253
215
234 245
-10
40
90
140
190
240
290
00
05
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Deal Size (US$ 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$mn)
PRAGMA
Turkish M&A at a glance (cont’d)
5
Privatizations (2007 – 2015) (*)
(*) Adjusted for cancelled privatizations and do not include SDIF sales
Source: Deloitte Annual Turkish M&A Reviews
19,3
16,2
5,2
17,3
15,0
22,0
17,5 18,0
16,4
2,3
5,2
1,2
2,9
1,0
6,4 6,6 5,9
1,8
12%
32%
23%
17%
7%
29%
38%
33%
11%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Deal Value (US$bn) Privatizations (US$bn) Ratio to Total Deal Value (%)
22,4%
PRAGMA
Turkish M&A at a glance (cont’d)
6
Foreign Investors’ Share in Private Sector (excl privatisations) Deal Volume (2011 – 2015) (*)
(*) Include estimates for deals with undisclosed values
Source: Deloitte Annual Turkish M&A Reviews
11,1
13,0
5,2
8,0
11,5
2,9
2,3
5,3
3,7
3,1
79%
85%
50%
68%
79%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
2
4
6
8
10
12
14
16
18
2011 2012 2013 2014 2015
Foreign Investors (US$bn) Turkish Investors (US$bn) Foreign Investors' Share (%)
PRAGMA
Turkish M&A at a glance (cont’d)
7
Financial Investor Activity (2007 – 2015) (*)
(*) Include estimates for deals with undisclosed values
Source: Deloitte Annual Turkish M&A Reviews
19,3
16,2
5,2
17,3
15,0
22,0
17,5 18,0
16,4
2,3
4,9
0,7 0,9 1,2 1,6 2,1 2,1
3,1
12%
30%
13%
5%
8% 7%
12% 12%
19%
0%
5%
10%
15%
20%
25%
30%
35%
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015
Total Deal Value Financial Investors' Deals Ratio to Total Deal Value
PRAGMA
Turkish M&A at a glance (cont’d)
8
Sectoral overview (2011 – 2015) (*)
(*) Include estimates for deals with undisclosed values
Source: Deloitte Annual Turkish M&A Reviews
Deal value (%)
2011 2012 2013 2014 2015
Energy 21% 31% 47% 32% 38%
Manufacturing 4% 2% 6% 5% 2%
Food & Beverage 21% 9% 6% 4% 2%
Financial Services 8% 19% 13% 20% 28%
Retail 5% 1% 5% 6% 5%
Others 41% 38% 24% 33% 26%
PRAGMA
M&A Deals with Middle Eastern Investors (I / VII)
9
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
Deal Value
(US$ 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
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
PRAGMA
M&A Deals with Middle Eastern Investors (III / VII)
11
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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% -
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
PRAGMA
M&A Deals with Middle Eastern Investors (IV / VII)
12
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
PRAGMA
M&A Deals with Middle Eastern Investors (V / VII)
13
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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% -
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
PRAGMA
M&A Deals with Middle Eastern Investors (VI / VII)
14
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
PRAGMA
M&A Deals with Middle Eastern Investors (VII / VII)
15
Deal Highlights
Date Target Company Target Sector Bidder Company Bidder Country Stake sold
(%)
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
Source: Mergermarket, Deloitte Annual Turkish M&A Reviews
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