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.

Dealflow 2008: BC Partners Acquires Migros; Manara grabs 21% ACT Airlines; Abraaj Capital partners up with Acibadem Healthcare
Migros Turk Acquired by BC Partners, Ltd.
14 February 2008

BC Partners Ltd., a London-based buyout firm, has agreed to a 1.98 billion liras ($1.7 billion), or 21.85 liras a share leveraged buyout acquiring 51% of Migros Turk AS from Koc Holding AS. BC Partners will also offer to buy out minority stockholders at the same price. This places a value of about $3.2 billion for Turkey's largest supermarket chain.

Some interesting statistics concerning the deal and supermarket/retail in Turkey:

  • Migros Turk has 961 stores in Turkey, Azerbaijan, Kazakhstan, Kyrgyzstan and Macedonia.
  • The deal values Migros at about 21-times forecast 2008 earnings, according to the average of 18 estimates compiled by Bloomberg.
  • BC Partners beat off rival bidders including buyout firms Blackstone Group LP and Kohlberg Kravis Roberts & Co., and Russian billionaire Mikhail Fridman's Alfa Group, as well as Turkey's 2nd biggest retailer - Paris-based Carrefour SA.
  • Turkey has attracted about $40 billion of direct foreign investment in the past two years.
  • Turkey has 17 supermarkets per million people, compared with 150 in the European Union, according to accounting firm PricewaterhouseCoopers LLP.

Well, this one has long been anticipated, and it looks like even Turkven got a piece in the syndication deal. Well done - considering the recent closing of their TPEFund II. This also makes cash readily availible for Koc Holding who is expected to hit the energy sector hard with the privitaztion of Turkey's electricity producers and distributors.

This also marks the largest private equity deal to date in Turkey as well as BC Partners first entry into the Turkish market. This deal beats the KKR $1.28 billion buyout of UN RO-RO of last year..

To read more ----> Bloomberg: BC Partners to Buy Turkey's Migros for $3.2 Billion (Update4)
AltAssets: BC Partners to acquire Istanbul-listed supermarket chain Migros


Manara Investments takes 21% stake in ACT Airlines
05 February 2008

A small cargo fleet of 7 Airbus A300's (2 Airbus A330-200s on order) and 250 employees based in Istanbul, ACT is looking to expand internationally into the MENA region, Eastern Europe, Central and South Asia. ACT was founded in 2004. Total value of the deal was not disclosed.

Manara is a newly established investment vehicle sponsored by four leading Saudi business groups. The four Saudi business groups, together with 3i Group plc, are the sponsors of the Manara Infrastructure Fund LP (MIF), a US$1 billion (target size) private equity fund for infrastructure investments in Islamic countries. It is intended that this investment in ACT will be transferred to MIF upon commencement of business.

To read more ----> Zawya: Manara Investments Acquires 21% Equity Stake in Turkey's ACT Airlines


Acibadem Healthcare Services Signs 50/50 Joint Partnership with Abraaj Capital
28 January 2008

The basics of the deal:
Abraaj Capital, a premier investment firm specialising in private equity investment in the Middle East, North Africa and South Asia (MENASA) region, announced that it has partnered with Acibadem Healthcare Services, Turkey's leading healthcare provider, to support its ongoing expansion in Turkey and establish the company's presence in the Middle East.

Almond AS, a 50:50 joint holding company formed by Abraaj Capital and Mehmet Ali Aydinlar, one of the founders and the Chief Executive Officer of Acibadem, recently acquired a 69.6 per cent stake in the Turkish firm. Abraaj Capital also acquired a 50 per cent stake in leading Turkish health insurance company, Acibadem Sigorta, from Mr. Aydinlar. Abraaj Capital's investment was made through its US$2 billion Infrastructure and Growth Capital Fund (IGCF).

Some real interesting statisics about Healthcare in Turkey:
There are currently twice as many physicians per 1,000 people in the 30 countries within the OECD than there are in Turkey and in the GCC, and nearly three times the available hospital beds. In the GCC states alone, demand for treatment is expected to grow more than two-fold in the next 20 years, to approximately US$60 billion per annum by 2025.

To read more ----> Zawya: Turkey's leading healthcare provider partners with Abraaj Capital to expand services in MENASA

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Posted @ 22:38   0 Comments
Tech Investments in Turkey as of 2008: Innovations Thinking Local or Going Global?
In January, trendsspotting posted about a survey they did with various VC's regarding the next big trends for 2008. They then compiled them into a tag cloud to flesh out the major issues. Their conclusions for 2008's upcoming trends were:

"Applications, green, mobile, networks, open, social"

Not suprising given the latest popularity of social networks, greentech, mobile applications, and the community aspect of any open-source technology. Take for example Facebook's new markup language to play with its API - FBML. Lately, Silicon Valley (Dave Hornik's podcast on VentureBlog for one) and Facebook have been talking about an "XML-like" or open source community platform that will be able to integrate all communities into, what is now being coined, your "Social-graph" - a play on words with demographics. So we will only have to make one profile, instead of many, that will follow us around the Net. So, although I'm not using Facebook, you will still be able to add my Linkedin profile, as well as see other applications that I may use, and vice versa.

This may ensure that Facebook and its own proprietary FBML, will continue to build and then try and dominate an overall platform community. Facebook so far has come out on top, and it is amazing to me that so many Turks have latched onto Facebook, without really knowing why they are doing it, let alone understanding how much information they are revealing about themselves. As I mentioned in my post regarding the acquisition of Cember.net, 1.6 million Turks (10% of all Turkish internet users) are members or Facebook, and that's only the Turks that have joined the "Turkey" community, which means that number is much greater.

Google is also trying to write its own ticket with its "Open Social" (wiki). This is an open source community that is geared to build its own applications - in direct competition with Facebook, and quite frankly should give FB a run for its money. You can also check out the Open Social Wiki.

But where does Turkey fit in?

Seth Godin once wrote that we must go beyond looking at the 4P's of a company and look for something that is remarkable. Unfortunately "remarkable" doesn't start with a "P", so he called it "Purple Cow". So, as an entrepreneur, is your idea and company remarkable? Are you a Purple Cow, rather than a boring brown cow? Turkish tecnology entrepreneurs and idea owners need to go beyond building "off-the-shelf" software packages, sitting comfortably in their Technopark labs, and truly look to what the innovators and early adopters want and would like to see. Entrepreneurs must realize that the consumer is now bored with what has been invented, and needs something remarkable to pull them out of their seat and buy.

More and more we need to be looking for not only social community websites, but websites that can take existing communities and work with them, around them and be able to integrate all communities into its makeup. Turkish technology entrepreneurs need to be able to follow these trends and realize that for a venture model to work in seeking high returns, they need high return ideas that are able to capture not just Turkey's, but the world's, attention. Mae Ozkan, in setting up her fund at GoldenHorn Ventures, has tried to instill this ideology in building Turkey's ecosystem, and will most likely show up in her future investments.

However, so far in the past, we have seen the realization that it is still just much easier to find a "Western" idea, translate it, and roll it out in Turkey. I realize I may be trivializing this issue a little (how many video services can we have in competing with YouTube?), but for the most part it has worked on basic consumer products, television (sitcoms and reality), and now the Web.

Let's look at some examples of Turkish venture-funded "copy-cat" or "clones".

AccessTurkey/iLab Ventures:
funded Gittigidiyor.com, a Turkish online auction site, which was later partnered (or purchased a minority share?) with Ebay. According to Alexa, ranked 14th most popular in Turkey
Kariyer.net, the leading Turkish job-finder website, is also funded by iLab. According to Alexa, ranked 47th most popular in Turkey

Mulakat.net - a recruitment and career site.
Bedava.com - a classified advertising site.
Araba.com - an online car broker - new and used cars for sale.
Emlak.net - a real estate service provider
and look, some social communities...
BizimAlem.com - a "European Turkish People Network"
KolayArkadas.com - translated "easy friend" - a Dating Network

Nokta Internet Technologies, a firm that I have not covered before but deserves its own post, is a technology holding company that acts like a venture fund with its own portfolio of funded web properties. It kind of reminds me of CMGI back before the bubble burst. A few of their investments are:
Blogcu.com - The Turkish version of "Blogger" that is trying to be a portal. According to Alexa, ranked 30th most popular in Turkey.
Izlesene.com - another video sharing site. According to Alexa, ranked 53rd most popular in Turkey.

I realize that I'm choosing only a few, and no disrespect is meant toward those investment firms. I will try and list more at a later date. In addition, by no means is this only happening in Turkey. These investments were mostly made after the bubble had burst. Perhaps, the Web 1.0 concepts are still saturating the globe due to the the geography of web penetration (web users/population).

This brings me back to the title of this post, are Turkish tech investments aiming local or looking global? The strategy of investing in a Turkish property in hopes of being acquired by the global leader is admirable (The strategy worked with iLab and Gittigidiyor). However, this strategy can only go so far. Take Emlak.net for example. Are they only satisfied with a Turkish speaking audience? Or could they go the extra mile and develop something similar to Zillow (www.zillow.com) - a community-wiki-based real estate sales platform that could very well span the globe? This will be the test. Are they remarkable enough? Are they a "purple cow"? Turkish entrepreneurs, please take heed.

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Posted @ 23:16   1 Comments
Turkish Mobile Applications Provider Pozitron Wins Harvard Business School's Global Business Plan Competition!
It seems my friends at Pozitron, who I posted about in June 2007, have won the HBS Global Business Plan Competition. The news has been posted courtesy of Dan Primack of PEHub, who judged at the event. Pozitron (www.pozitron.com), a mobile and alternative communications solution provider based in Turkey, won the Global Business Plan Contest sponsored by the Harvard Business School’s Entrepreneurship Club on January 27. It was the first contest of its kind that brought together a panel of judges from the venture capital and technology sectors including IDG Ventures Boston, HarbourVest, and Thomas Financial.

Pozitron is an R&D focused enterprise communications solution company taking tremendous strides in innovation and development in the mobile industry. It develops new technologies which makes wireless experiences more enjoyable and powerful. Founded in 2000, Pozitron provides professional service and solutions to meet the demands of its customers. Pozitron is the fastest executed principal partner of SUN Microsystems in the world. (There are only 8 principal partners in 96 countries). Pozitron created the first mobile banking application for Turkey’s largest bank, Türkiye İş Bankası. Everyday, over 100,000 users enjoy Pozitron’s mobile applications and more than 250,000 people communicate through Pozitron’s solutions.

Pozitron’s business plan, focused on its integrated mobile banking product, was chosen among a dozen of companies to represent Turkey. It then competed against several top firms representing Armenia, Colombia, Germany, Lithuania, and Mexico at the Global Business Plan Contest and secured first place after two rounds of deliberations.

"Mobile banking solutions are essential in our increasingly globalized world," says Pozitron CEO Fatih İşbecer. "As many people are starting businesses or doing trade, communications is an essential part to help them grow. We’re deeply honored that Harvard Business School chose our firm among a stellar group as having enormous potential."

Pozitron, last year, won its place as an "Endeavor Entrepreneur", and since then has been able to secure Iş Bank as a customer in building and implementing its Java-based mobile-banking application. "This is the hallmark of high-impact entrepreneurship," said Linda Rottenberg, Endeavor Co-founder & CEO, "We’re proud to have Pozitron among an innovative group of Endeavor Entrepreneurs who are creating new breakthroughs that are improving their communities."

For an entrepreneur to score such a major client before venture funding and providing necessary revenue, it clearly gave them a leg-up in the business plan competition. They are currently negotiating with other banks, and, as can be seen from the PEHub post, will most likely role it out with other international banks.

Another noteworthy point regarding this feat is that Pozitron was able to make use of 4 intership students from the G-Lab Program of MIT Sloan School of Management. These 4 students helped Pozitron toward their Latin American expansion strategy. For all you entrepreneurs out there, this is a great program, one that you should really check out.

Congratulations go to Fatih and Firat İşbecer!

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Posted @ 22:12   0 Comments
Turkish Business Networking Site - Cember.net Acquired by German Social Network Xing
In January, it was announced (here via Reuters) that Xing had aquired Cember.net for 4.4 million euros ($6.4 million), to be paid in stages. Xing is a professional business social networking site that had 4.25 million members at end-September 2007 and competes with US-based Linkedin. Cember.net apparently is the largest professional networking social network in Turkey with over 280,000 members. The site is ranked at 117 in Turkey according to Alexa. Overall ranking worldwide looks like this when compared with Linkedin:
Cem Sertoğlu came up wıth a good metric for the value of Turkish eyeballs on this deal:
The €15/member price tag for the acquisiton shows that there's still a bit of a discount for Turkish internet properties. Xing is trading at about €45/ member.
Based on this metric, and with an estimated (although dated) 16,000,000 Internet users in Turkey as of September 2006 (only representing 20% of the population), is this a good price? It's hard to say. I can't imagine a lower price for any Internet property given good traction, but to Xing, this might seem damn expensive, given that Cember's members represent barely 2% of all Turkish Internet users. Facebook has 1.6 million users with a page in Turkey, representing 10% of all Turkish Internet users. Please remember that 25% of Turkey's population resides in the 15-29 age range. Xing may figure this and that it is only a matter of time before membership picks up.

Perhaps it's the demographics, or the now-coined "Social Graph", of the Turkish users that warrant the value of the user, those users being professional networkers. Overall, it seems that Xing is rushing to spend its IPO Euros in efforts to consolidate Europe, before Linkedin smashes them to bits. Linkedin already has a huge footprint of Turkish users worldwide, although the site is in English. However, in this case for Turkey, it appears that, although not entirely having the same utility as Linkedin and Xing, Facebook has really already won the game, now the #2 most popular site in Turkey behind Google and in front of YouTube (despite the recent blocks). On a side note, this brings up the question: When will Facebook be blocked? Again, perhaps its only a matter of time before someone builds the wrong application.

In my next post, I'd like to touch on another issue that arrises from this discussion, that of Turkish Internet "Copy-Cats" or "Clone" sites of Western sites. Is that the answer to a successful Turkish Internet property? Stay tuned...

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Posted @ 20:43   1 Comments

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