Buyout Firm Turkven Sees 45 Exits From Turkey in Two Years

Owners of about 45 Turkish private-equity investments will probably consider sales in the next two years as buyout firms take advantage of an improving economy.

Investments made between 2006 and 2008 could earn an annual 25 percent internal rate of return, Seymur Tari, managing director at Turkven Private Equity, Turkey’s second biggest buyout firm, said in an interview during a Private Equity International conference in Istanbul on Sept. 17.

Economic growth exceeding 5 percent a year during Prime Minister Recep Tayyip Erdogan’s decade-long rule attracted private-equity firms including The Carlyle Group LP, BC Partners Ltd., Citi Venture Capital International and KKR & Co. LP. BC Partners is leading a group of buyout firms including Turkven that bought Turkish grocer Migros Ticaret AS for $3.3 billion in 2008 in the country’s biggest buyout transaction to date.

“There are an estimated 45 or more investments that await an exit in Turkey in 2014 and 2015,” said Tari, whose firm sold a stake in Pronet Guvenlik Hizmetleri AS, a security alarm maker, to Cinven Ltd. for an undisclosed price in 2012.

Rate of Return

Cukurova Holding AS, which owns 53 percent of Digiturk, Turkey’s biggest digital TV platform, received non-binding bids from Turkey’s biggest telephone company Turk Telekomunikasyon AS and a unit of Dogan Yayin Holding AS for the stake.

Istanbul-based Cukurova is selling its Digiturk stake to pay back Turkey’s savings deposit insurance fund, which took over several Cukurova companies including Digiturk in May for debts totaling $455 million owed to the fund. Providence Equity Partners Inc., a Rhode Island-based buyout firm, owns 47 percent of Digiturk together with Turkven.

BC Partners hired JPMorgan Chase & Co. and Bank of America Corp. to review options such as a sale of stake at Migros, two people with knowledge of the matter said July 1.

Tari’s forecast compares with a global internal rate of return average of 5.5 percent for 2012, the lowest since 2008, according to Bain & Co.’s 2013 global private equity report. The report said Turkey lags Latin America and China as a favored destination for private-equity investments in emerging markets.

M&A Volume

The volume of mergers and acquisitions in the first eight months of this year in Turkey rose to $11.5 billion from $7.7 billion in 2012, according to data compiled by Bloomberg. Private equity-backed deals fell to $450 million from $1.8 billion in the same period, according to Ernst & Young LLP’s Turkey unit.

“Private-equity firms which had targeted to gain 20 percent or more returns in Turkey have been holding off exit plans this year,” Demet Ozdemir, head of private equity at the Ernst & Young unit, said in an interview Sept. 17.

“Volatility in global markets scared off strategic buyers, especially in Europe, and this is also affecting Turkey.”

Globally, exits based on initial public offerings have fallen by about two-thirds from the pre-2008 period, Ted Cominos, head of international private equity at Edwards Wildman Palmer LLP, a Boston-based law firm, said in an interview in Istanbul Sept. 18.

“On the other hand, secondary sales have been more than doubled,” Cominos said, referring to sales to other buyout firms. “Exit options have been limited and for this reason investors hold assets for one or two more years to see if they can get a higher value at exit.”