KPMG Zoom: Mergers and Acquisitions Trends – 2020

KPMG Turkey M&A Advisory announces, “KPMG Zoom: M&A Trends” Report for the second time this year. According to the report, the volume and the number of transactions increased in Turkey from previous years. The optimistic expectations for 2021 is maintained and it is predicted that the transaction volumes will increase in parallel with the gradual improvement in the economy. 

In addition to the pandemic that marked the past year, the US presidential elections, protests and actions in different countries of the world, especially in the USA and Hong Kong, the conflicts in West Asia and the uncertainty about Brexit affected the economy and politics.

According to the report, M&A activities in the world in 2020 was close to but below the previous year’s performance. Meanwhile in Turkey, due to the transactions of one billion dollars and above, the volume and the number of transactions increased compared to 2019. The total volume of transactions with disclosed values amounted to USD 6.9 billion in 2020. 

In parallel with global trends in 2020, the rise of digitalization caused an increase in both the transaction number and transaction volume for the TMT sector. In the technology, media and telecommunications sector, the largest transaction in Turkey was Turkish Wealth Fund’s (TWF) acquisition of Turkcell's 26.2% stake for a total consideration of US $ 1.8 billion.

Financial investors (private equity, venture capital, wealth funds, etc. carried out 78 transactions in 2019, with the share of the transaction volume they created accounting for 3 percent of the total transaction volume. On the other hand, transactions by financial investors, totaling to 129 transactions in 2020, captured 52% share of the total transaction volume, unlike the previous year. The acquisitions of Turkcell by TWF and LetterOne in June 2020 and the minority shares of Borsa Istanbul by Qatar Investment Authority were the most important transaction by financial investors in 2020. Similarly, Actera’s investment to Vivense in July 2020 and Doğan Holding’s venture capital Öncü Girişim’s 70% share acquisition of Ses Ambalaj stood out as transactions executed by financial investors.

Similar to previous years, the number of mergers and acquisitions carried out by foreign investors in 2020 accounted for 32 percent of all transactions, totaling 83. Although the total transaction volume of foreign investors increased in comparison to 2019 and reached to USD 3.1 billion, it accounted for 45 percent of the total transaction volume, leaving them behind the domestic investors. Furthermore, 6 of 10 largest transactions in 2020 were carried out by foreign investors.

Ongoing privatization processes since 2018 and before and Savings Deposit Insurance Fund of Turkey (SDIF) transactions resulted in an uptick in public sector transactions. As of 2019, value creation in the public sector has been targeted with an active role of TWF within the scope of economic transformation based on production, export and financial stability. TWF, which realized this role with important transactions last year, continued to create value in the public with strategic and large-scale investments and acquisitions in 2020. As a part of its goal to support Turkey’s competitive companies, TWF acquired 26.2% shares of Turkcell, making it the largest shareholder in the board, increasing the savings of the national economy and encouraging the growth of non-banking financial services by merging insurance companies under a single roof, were the most significant public sector transactions. Acquisition of the operating rights of Çukurova Airport by the joint venture of Favori İşletmecilik - Yako Tekstil and Qatar Investment Authority’s acquisition of 10% shares of Borsa Istanbul from TWF stand out as this year’s important public transaction. 

Head of KPMG Turkey Advisory Services Müşfik Cantekinler maintained his optimistic expectations regarding the mergers and acquisition transaction in 2021.

As KPMG Turkey, who has been chosen as the leading financial advisor of Turkey in 2020 by the well-known reputable global M&A intelligence platform Mergermarket, alongside taking part in high-profile deals, Cantekinler mentioned the following topics:

• The impact of the epidemic will gradually decrease as a result of the vaccination studies, the unprecedented economic support and incentives provided by governments, the expansion policies of central banks and the provision of high liquidity packages. In this scope, together with the highlighting of Turkey's capacity within the industrial manufacturing sector causing growth, employment and price stability to achieve monetary goals and exchange rate policy improvement, can be seen as factors that stand out and could boost investor appetite throughout the stabilization process. On the other hand, increasing effects of the COVID-19 pandemic, a prolonged recovery period, possible US and EU sanctions on Turkey, political uncertainty and security problems in the close geography of Turkey can be considered as downside risks.
• According to the report by KPMG Turkey, the industrial manufacturing and automotive, technology, media and telecommunication, pharmaceutical and healthcare sectors will be among the prominent sectors in 2021.
• The investments to be made by the TWF in petrochemical, mining and energy production projects from domestic sources, the re-bidding process of the companies transferred to the Savings Deposit Insurance Fund and the assets in the portfolio of the Privatization Administration are among the factors that may increase the transaction volume.
• With the acceleration of the global vaccination efforts and the end of the pandemic, we maintain our optimistic expectations for 2021 and anticipate that the number and volume of transactions will increase with the gradual improvement.