Big Drop in M&A: Foreign Elections Await

In 2022, which we are preparing to leave behind, while there is a decrease in the volume of mergers and acquisitions in the world, the decrease in the volume of transactions and the number of transactions in Turkey is striking.

According to KPMG’s Perspective M&A Trends 2022 report, while global M&A transaction volume declined compared to 2021, it was close to last year’s record level in terms of transaction numbers.

Although in 2022 mergers and acquisitions for 3.5 trillion dollars were completed in the world, this amount showed parallelism with previous years.

In Turkey, both transaction volumes and the number of transactions decreased similarly. While the total volume of transactions whose value was disclosed decreased by 63 percent from a year earlier, it declined to $5.3 billion, while the estimated total transaction volume was estimated at $6.5 billion, along with transactions whose value was not disclosed. revealed. The total volume of transactions whose value was disclosed in 2021 was $14.3 billion.

Regarding the top 10 in M&A volumes, it should be noted that there were 4 transactions originating from the United Arab Emirates and Qatar.

‘THE FOREIGN INVESTOR WILL OBTAIN PRICE STABILITY’

Making assessments at the introductory meeting of the report, Müşfik Cantekinler, Head of Corporate Finance Department at KPMG Turkey, stated that 2022 was a difficult year and showed the decline in the volume of M&A in the world, the never-ending effects of the pandemic . , the Russia-Ukraine war, while the global monetary and financial sector in Turkey acted differently from its policies and showed a negative image in foreign relations.

Noting that companies switched to a wait-and-see policy in this period, Cantekinler stated that investment appetite and risk perception must be in the right place to increase foreign investors’ interest in the country and made the following evaluations;

“Monetary policies that do not match those of the US and the EU also affect foreign investors. It is necessary to implement the right policies. Then comes the stranger. Problems on the southern border, war and unrest in Syria and Iraq also affect foreign investors. There is still interest in Turkey, but it is waiting for elections and price stability.

Not applying the appropriate monetary policy increases the perception of risk, but for them the level of the exchange rate is more important. We also hear some speeches about how the exchange rate has been stable recently, and foreigners ask how the exchange rate is stable while inflation does not stop.”

‘NOT JUST THE CURRENCY, THE LEGISLATION IS IMPORTANT’

Noting that the foreign point of view is not based on the exchange rate alone, Cantekinler continued as follows;

“Foreigners also look at the legislation and regulations of the sector they are going to enter. It is also important if there are applications such as incentives, punishments and coercions by the government. It is not preferable that they introduce some rules such as capital control. Therefore, such events scare some foreign investors.

Noting that the ratio of M&A transaction volume to GDP is around 4.5 percent globally, Cantekinler noted that this ratio declined to 3.5 percent in 2022 due to declining M&A transactions. investments and the waiting policy of companies.

While this rate was 2 percent in Turkey last year, it decreased to 0.6 percent in 2022.

‘THE MOST IMPORTANT EVENT OF THE 2023 ELECTION’

Assessing developments that may affect M&A for the coming year, KPMG Turkey Head of Corporate Finance Department Müşfik Cantekinler said:

“The 2023 election comes first, regardless of the result. Foreign investors ask who wins. It will be beneficial regardless of the result, since there is a pre-election waiting situation. In second place comes the Russia-Ukraine war, which greatly affects our region.

A slowdown in economic growth is also expected here in Turkey, with concerns of a recession following the monetary policies implemented by the US and the EU.

The search for oil and gas in the Eastern Mediterranean and the steps for Turkey to become a gas hub in this region are also events that may affect mergers and acquisitions in 2023.

‘TURKEY IS BELOW THE WORLD AVERAGE’

KPMG Turkey’s head of M&A services, Gökhan Kaçmaz, said Turkey’s transaction volume to GDP ratio is well below the global and G20 average.

Saying that “private equity funds will wait until the elections to invest in Turkey,” Kaçmaz also noted that M&A volume of approximately $200 million did not materialize this year due to high inflation and higher values ​​of the company.

THE LARGEST TRANSACTION TÜRK TELEKOM

The largest transaction in the TMT sector in Turkey was the purchase of 55 percent of the shares of Türk Telekom by the Turkish Wealth Fund for $1.65 billion. This transaction also came to light in 2022 as the only “mega transaction” in Turkey that exceeded the $1 billion level.

Another important transaction in the technology, media and telecommunications sector was the acquisition of 6.8 percent of the shares of Getir, with an investment of 768 million dollars made by the financial investor group, which includes investors such as Mubadala Investment Company , Sequoia Capital and Tiger Global.

Another transaction that passed the $500 million threshold was the acquisition of 50 percent of the shares of Kalyon Solar Energy Generation by the United Arab Emirates-based International Holding Company.