A Turkish Private Equity Web Log

In an effort to cover the Turkish Private Equity Industry - for the promotion of Entrepreneurship, the private equity asset-investment model, and the communication thereof.


Corporate Governance: Turkish Companies Need to Face the Music
One of the motivating forces behind Grandstanding Traction was my friend Erkan from Knowledge Revisited (http://governanceturkey.blogspot.com), a blog about corporate governance issues in Turkey. Erkan has a passion and deep knowledge of governance issues, and therefore a lack therof in Turkey. When it comes to evangelizing the reasons why companies should be doing the upmost to use fair and ethical practices in business, he is very motivated.

This last week, I took a look at his posts and noticed that once again Galatasaray Sportif AS (GSRAY.TI) with its parent company Futbol AS is back in the limelight over shareholders' rights. He first started covering this story in his post: Rights of minority shareholders in Turkey and two examples.... We'll have to wait and see if the Capital Markets Board (CMB), the market watchdog, will do anything, or ...eh, just watch. UPDATE: It seems the CMB has made their decison.

I can't stress this more. When investors start seeing more stories like this of contracts that fail to live up to their value in ink, Turkey will continue to have problems doing business with the rest of the world. I, myself, may even be doing harm by prolonging this story in the media, rather than just calling it a singular occurence. The problem, as Erkan can contest, is that this is not uncommon.

For the many family-owned companies in Turkey, coming to the realization that with expansion capital or turnaround investments comes the responsibility for setting up investor relations. Selling equity or debt is one thing, but the actual relations that go along with giving up control is difficult for some. In dealing with this cultural aspect, investors need to be guides as they convey the final destinations to the sons of the fathers' companies. There are thousands of SMEs in Turkey, and it will be the ones that truly see the value in corporate governance that will succeed and go on to do great things, both in Turkey and the global market.

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Posted @ 14:08   1 Comments
American Business Forum of Turkey Highlights 2007 Executive Survey
The American Business Forum of Turkey released their 2007 Executive Survey focusing on the Turkish investment environment. The ABFT represents more than 70 US companies doing business in Turkey and works toward continued trade and communication between the two countries. The survey consists of only about 50 responses from US company executives.

All in all, the meat of the survey is pretty predictable, and for those who have been following Turkey's investment environment - it should not be suprising. But more importantly, the survey does confirm that Turkey still needs to go a long way in developing its judicial system toward protection of rights as well as dealing with the tedious bureaucracy of doing business.

If your interested, The New Anatolian provides a nice summary of the 2007 ABFT Executive Survey.

In addition, and based on these results, ABFT member Jeff Kemprecos from Merck Sharp & Dohme Pharmaceuticals, gave a nice presentation of the results with implications and European comparisons for the pharmaceutical industry in Turkey at an American Turkish Council meeting in Washington DC. He does bring up some good points about how Turkey is really in the middle of the road when it comes down to innovation. To use another idiom, we really may be on the fence pertaining to how we move forward to spur innovation. In doing so, Mr. Kemprecos speculates on the idea that Turkey could become the next Ireland or Singapore in Pharmaceutical R&D.

At a previous ABFT meeting hosting Finance Minister Kemal Unakitan, Mr. Kemprecos also touches on the issue of watching the micro-reform issues of the economy, while agreeing that the macro-policies are doing fine. Again, he really likes the comparisons to Ireland and Singapore. But this time he likens the potential powerhouse of Turkey in reference to technology, medicine, pharmaceutical R&D and exports. Let's keep our fingers crossed on such issues - the elections are just around the corner.

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Posted @ 00:37   1 Comments
CRH Invests in Turkey: Takes 50% of Denizli Cement
CRH, an international building materials group, announced that it had purchased a 50% interest in Eren Holding's Denizli Cement, an integrated cement and readymixed concrete business. CRH is an Ireland-based conglomerate with over 80,000 employees operating in 28 countries with its core businesses in primary materials, value-added building products, and specialist building materials distribution. CRH holds a market capitalization of Euro 17.4 billion. The deal was announced in conjunction with another deal in the US, placing the value of both deals at roughly Euro 225 million in cash and debt. Unfortunately, because of this, we are unable to get exact numbers with the Turkish transaction. According to the CRH press release:

Denizli has a modern cement facility with a clinker (baked and fused clay, shale, and sandstone) capacity of 1.8 million tonnes and is the market leader in its region. The company has limestone reserves of more than 100 million tonnes and produced 1.8 million tonnes of cement in 2006. Denizli also operates a network of 13 readymixed concrete plants in Denizli and the surrounding area, which produced 1.3 million cubic metres of concrete in 2006.

Commenting on the transactions, CRH Chief Executive Liam O'Mahony said: "Denizli, a modern vertically integrated cement and readymixed concrete business with excellent reserves and a strong management team, is CRH’s first investment in Turkey. It also represents a further step in the expansion of Europe Materials presence in the Mediterranean Basin."

As seen in the previous post (Turkish Real Estate: The Sleeping Giant), this transaction maintains the momentum that Turkey is seeing in the construction and building materials sectors. It is only natural for a company with European expansion objectives to try and get a piece of this market, especially when it is predicted to be booming for the next 10 years. The only question is - who will be next?


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Posted @ 23:15   0 Comments
Turkish Real Estate: The Sleeping Giant
A close colleague with over 9 years in the Turkish VC/PE industry recently told me that real estate, of all potential Turkish investments, will have the greatest investment potential going forward in the next 10 years. Indeed, perhaps Turks have always known this, when markets were between crises, or politicians were finished with their rhetorical recants, the people have always held their greatest assets either under their mattresses or in the land that they own (and not in the banks).

Yes, we have seen this, but with the recent passing of mortgage laws and banks scrambling for a piece of the action, not to mention the need for 150,000 new homes every year because of the increase in population, Turkey is coping with a construction boom, and finally consumers may have the ability to get cheap credit. As well, according to a report on Turkey by the US Commercial Service, "projections made for 2005 to 2015 state that, on an annual basis, 900,000 houses should be built to meet demand." Naturally with a boom in the construction sector, you must also look at the building materials, cement and architecture sectors. As of 2006, all of these subsectors in construction accounted for roughly 30% of GDP! Building products alone made up a 20% share of total Turkish exports. To further drive his point home, my friend forwarded this fantastic 6-page Turkey factbook by Europe Real Estate (europe-re.com).

What people fail to understand or consider is the girth of Turkey's greatest asset: its land. While we look at it as Turkey making good use of its resources, others might look at it as exploitation. But let's face it - Turkey is an emerging market territory reaching "emerged" status; it is the bread basket and manufacturing localle of Europe, and its simply expanding. Naturally, as more and more businesses and people discover its potential, land values will continue to inflate. In addition, by simply searching for success stories pertaining to accession countries to the EU (like Spain, Ireland, the eastern European countries), large gains were reaped in those years after accession occured - the same can be true for Turkey.

This means we will continue to see growth in construction materials, construction and architecture (which, in addition, is promising for GDP). Those firms that smartly have a man on the ground to monitor the truly lucrative opportunities in these construction sector firms, as well as projects, will be the differentiating factor for foreign investors. Established PE firms in Turkey are already salivating and chomping on the bit - ready to go.

Following the advice given to me by my friend, Grandstanding Traction will attempt to keep a closer eye on this market and on the future by dividing posts into various sectors for easier access and closer analysis.


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Posted @ 20:56   1 Comments
Some Statistics from March: Grandstanding Traction gets some traction of its own.
Since starting this blog in November, 2006, I have plodded forward not knowing where it would take me. Was there a need for an informational blog on Private Equity and Venture Capital in the emerging market of Turkey? I thought so. Should I expand on Europe, the Middle East and Africa? I didn't or won't know if I have the time. The real "Ah-Ha" came when AlarmClock:Euro posted about Grandstanding's exploits, and then the visitors started pouring in. One thing is for sure: the more I posted the more visitors started visiting. This should ring true for all content providers regardless. Having said that, I have tried my best to gather well-rounded material to give the clearest professional picture of events. In the future, I will do my upmost to report on fundings, dealflow, and exits. In addition, I am trying to make an extra effort toward providing a sector by sector analysis. Of course, having only two hands and 24 hours in a day is a hindrance, and therefore I beg your patience.

The following is a provided glimpse into the world of Grandstanding Traction's log files. It by no means is a complete picture. Recalling my datamining days, they are just a few "nuggets".



The mix of visitors hasn't suprised me so far. Moving forward, I expect the page views rate resulting from Turkey to diminish as more developed nations chime in.



This is simply a list of catalogued and categorized institutions for March where IP's were able to be resolved. So far, with no previous data to work with, I am not able to provide rank. It is simply too early. These lists are alphabetical, and only represent a chosen handful of total visitors, but provide an interesting outlook on what will be gleaned in the future.



I was able to provide a rank of search terms for the month of March. Of course the significance of TAV's IPO (posted here) and Murat Cavusoglu and Isak Antika's funding of Actera Partners (posted here) was in the limelight. Interest in Actera Partners has still not fallen off in April and will be updated later.

If you are interested in viewing more information regarding Grandstanding's logs, please contact me at turkvcanalyst@gmail.com.

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Posted @ 19:28   0 Comments
Turkish Entrepreneurs and VC's meet in Silicon Valley at TABCON
A friend of mine just recently sent me a link to TABCON - the 4th Annual Turkish American Business Conference. To be held in San Jose, California on April 28th, this year's theme is "Turkey's Role in the Global High Technology Market".


Professor Tony Seba from Stanford University will be the Keynote Speaker, and there will be 5 panel discussions:
  • How can Turkish and American high-tech companies become valuable partners?
  • Turkey as an Electronic Design House
  • Funding a Start-up, Experiences of Turkish American Venture Capitalists
  • Global opportunities in the Wireless Sector
  • Web 2.0 in Silicon Valley and İstanbul
The makeup of these panels looks very inviting with such professionals like Mehtap Özkan of Golden Horn Ventures, Aydιn Şenkut of Felicis Ventures, Kerim Baran - founder of Yonja.com, and Emre Sokullu of GROUPS and writer/analyst for Read/WriteWeb. Too bad I can't go, as Grandstanding Traction is still on a shoestring. But there is not much time left, so you better check it out: Go to TABCON.org

Too bad this conference couldn't be in Turkey, I'm sure the attendance would be very large. Maybe there is a similar conference, so if my readers know of a similar conference in Istanbul, drop me an email, and I'll attach it to this post.

Finally, on a (log file) statistical side note for some of Grandstanding's more enthusiastic fans:
  • Could my avid reader from Hessen, Frankfurt, Germany please tell me who you are?
  • Rumour? - Can anyone tell me why someone at the IFC in Istanbul is seaching for Can Deldag of the Carlyle Group?
  • And hello whoever you are at Kayit Merkezi AS, drop me a line.
Thanks for the traction!


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Posted @ 18:06   0 Comments
The Shopping Center Boom in Turkey
The beginning of 2007 has been marked by some notable entries into the Turkish market: foreign investment into Turkish shopping centers. According to an article in the TDN in February quoting a WSJ article, "prime shopping centers offer yields of around 8 percent to 9 percent. Investors buying shopping centers before they are completed hope for yields of 10 percent to 11 percent." I would venture to guess that ROI’s are very much in the teens when it comes to Turkey’s current environment, hence the future demand. (Corio’s Real Estate Investment Fund expects a 5-year return of 20%!)

In another example, Andrew Finkel writes in Today’s Zaman that, "the new Kanyon shopping mall designed by Venice Beach headquartered Jerde Associates is now estimated to be worth three times its $200 million ticket price." Aside from these numbers, the rush towards investment can be attributed to one important statistical comparison: Turkey has just 30.4 square meters of retail space per 1,000 people, a fraction of the European Union average of 171.1 square meters, according to advisory firm Cushman & Wakefield Inc.

In addition, the WSJ goes on to state that about 3 billion euros to 4 billion euros ($3.9 billion to $5.2 billion) of real estate deals are expected to be transacted in Turkey this year. This compares with about 1.1 billion euros in deals last year, which, in turn, represented a tenfold increase from 2004.

Recent entries, acquistions and investments are as follows:
  • 14th, February 2007 - Citigroup Venture Capital is in talks to buy stakes in two of Turkey's leading retail chains, Boyner and Beyman, in a deal that highlights the growing interest of private equity groups in acquiring Turkish assets.

    The Boyner family, an Istanbul-based business dynasty, said in February that its holding companies had entered into exclusive talks on selling stakes in Boyner Department Stores and Beymen, a luxury goods chain, to CVCI in a deal that could value them at $450m.

    Boyner said the family believed it was the right time to sell. "It gives the holding company liquidity at a time when there are lots of opportunities in the market," she said.

    Under the terms of the proposed deal, CVCI will buy 30 per cent of Boyner and 50 per cent of Beymen.

    The largest private equity deal so far in Turkey was Texas Pacific Group's investment in Mey, a local beverage group. TPG purchased 90 per cent of the company last year in a transaction that valued Mey at $900m.


  • 5th, October 2006 - Merrill Lynch in partnership with İstanbul-based Krea Real Estate made its first real estate investment with 50 percent share of the Neo Shopping Mall in Eskişehir.

    Merrill Lynch is hoping to acquire 100%. According to Merrill Lynch Turkey Global Markets and Investment Banking head Kubilay Cinemre, "Here we have a business capacity of $1 billion," referencing both commercial and housing projects.


  • 15th, November 2006 - Cevahir Mall, Europe’s largest shopping centre acquired by St. Martins Property.

    St Martins Property, part of the Kuwait Investment Authority, has purchased Europe's largest shopping centre, Cevahir, in Istanbul for a sum in the region of $750 million from its joint owners, the İstanbul Municipality and the Cevahir family.


  • 23rd, January 2007 - VastNed Retail buys Turkish shopping center.

    Dutch based pan-European retail property investor VastNed Retail enters Turkey by acquiring a neighbourhood shopping centre in Istanbul at a price of €9.7 million. The shopping center is located on Kazim Orbay street, Sisli, Istanbul and is called Elysium Shops. This neighbourhood shopping centre is newly built and comprises 4,850 ²m of retail space and 200 parking spaces.
In the area of Contract Management firms and Consultants:
For Dutch property group, Corio, who paid a benchmark $192 million for an initial 46.9% stake in the nearby Akmerkez mall in a 2005 public offering, the shopping center boom of Turkey seems to have fit into their plans.
  • 9th, February 2007 - Corio purchases 40% interest in Turkish shopping center.

    Corio has announced the acquisition of a 40% interest in Teras Park shopping center currently under development in Denizli, in the south west of Turkey, for an amount of approximately €55 million.


  • 2nd, March 2007 - Two more Acquisitions for Corio in Turkey

    Corio, one of the largest listed property investment companies in Europe, said it would acquire the Adacenter shopping center currently under development in the northwestern city of Adapazarı, Turkey for about $65 million. In addition, the property developer said it will also take a 7 percent stake in "potentially large scale" project Acıbadem, to be developed in Istanbul.


  • 21st, March 2007 - Corio has signed an agreement for the acquisition of a 50%-interest in Esenyurt shopping center currently under development in the Esenyurt district on the European side of Istanbul for a total amount of approx. €42 million (US$60m).

On a final note, I’ll leave you with some slides to ponder from Corio’s Andre Van den Berg’s presentation to Ak Yatirim in January 2007. His model of Turkey being in the center of the development cycle is very telling for what still is to come, and as you can see by the statistics of plans under development, it doesn’t look like it will be slowing down anytime soon. He also leaves a final concern: the need for strict planning policies in the public administrations. Istanbul does have the potential to overbuild without regulating infrastructure and legal framework and this can be worrisome. Very poignant indeed.




For further reading:

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