Turkey M&A Poised for Revival as Erdogan's Win Ends Turmoil

  • Clear win for AKP could revive state asset sales, private M&A
  • Pragma expects deals to rise by value, volume in 2016

Turkish mergers and acquisitions may experience a rebound in 2016 after a clear election victory for the AK Party ended months of political turmoil, according to Pragma Corporate Finance.

The government will probably re-start the stalled state asset-sales program and the re-election of the party co-founded by President Recep Tayyip Erdogan could boost confidence and reinvigorate private deals, said Kerim Kotan, managing director at Istanbul-based Pragma, an Istanbul-based M&A consultancy firm.

The lira rallied and stocks advanced immediately after the Nov. 1 vote, as investors welcomed the prospect of a stable government, even as some analysts warned of the longer-term risks associated with Erdogan strengthening his dominance. Four divisive elections in two years and a wave of violence in recent months have taken their toll on dealmaking: completed M&A fell 67 percent to 1.9 billion in Turkey as of Nov. 5 this year, according to data compiled by Bloomberg.

“On the back of the substantial slowdown in M&A this year, 2016 is likely to be a U-turn year for Turkey, with the M&A activity as measured by both the number and volume substantially recovering,” said Kotan, whose firm has completed eight deals this year and is advising on two more with a total combined value of $1 billion.

The government’s asset sale agency, OIB, plans to auction ports in Izmir and Tekirdag next year, the agency’s head Ahmet Aksu said in Istanbul Wednesday. Power plants are among other assets they may go on sale, he said.

Banks, Insurance

The deferred sales of Halk Sigorta and Halk Hayat ve Emeklilik, which are insurance units of Turkiye Halk Bankasi AS, could resume in 2016, Pragma’s Kotan said. State asset deals may be dominated by the potential sale of operating rights for the set of toll roads and two bridges across the Bosporus, and the possible sales of Istanbul gas-grid company Igdas, sugar plants, power plants and state cable TV operator Turksat, he said.

Some deals have been on hold in the past six months, at least partly because of Turkish political events, Daniel Cousens, a corporate partner with lawfirm Linklaters LLP, focused on Turkey, said in an e-mailed response to questions.

“The optimistic view is that there will be a release of activity, which was on hold due to domestic political uncertainty, based on the fundamentally strong case which Turkey presents to investors with a longer term or strategic interest in the market,” he said.

Challenges posed by the Turkish currency and the volatile regional situation remain, he said.

Political turmoil has weighed on the Turkish currency
Political turmoil has weighed on the Turkish currency

The lira was the second-worst performer among 24 emerging-markets currencies until the last trading day before the vote on Nov. 1, declining 20 percent against the dollar, according to data compiled by Bloomberg. Turkey is at war with Kurdish rebel group PKK and forces in Syria linked to it, while a series of Islamic State suicide attacks have killed more than 130 people.

Turkish companies that are the focus of current M&A speculation include HSBC Holdings Plc’s loss-making Turkish unit and Finansbank AS, owned by National Bank of Greece SA. Turkish billionaire Husnu Ozyegin’s Fiba Holding is considering bids for both lenders, according to people familiar with the deliberations. The biggest completed deal this year is Fiba Holding’s sale of container port Kumport to a group of Chinese investors for $920 million in September.

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