Private Equity on the Turkish market

How to get a Private Equity investment for a Turkish company?

Do you have a good and fast growing company in Turkey with liquidity (cash) issues to grow further ? In this article we try to explain you what a Private Equity investment is and how it can help your company. We have good contacts to Private Equity in Turkey and can help you to determine if this type of investment can be useful for your company. We explain about the background and interests of PE investors and their specific requirements in Turkey. The strength of the Corporate Finance in Europe team is the combination of in depth knowledge of Private Equity requirements in Turkey combined with speaking the local language.

When to use Private Equity (PE) in Turkey?

Firstly, your company needs to be a good company and have a market leading position (or be able to achieve this) in its market. Your company needs to be unique as PE investors get a lot of requests and will only invest in the very best companies. There are different types of private equity investors investing in companies with only 20 employees up to a few thousands. Revenues can go from 5M Euro up to various hundreds of millions Euro or more. The private equity investors we are in touch with invest mostly in companies with revenues up to 200m Euro.

What different types of private equity transactions occur in Turkey?

Private equity transactions in Turkey usually involve buyouts. On the Turkish market, private equity capital is primarily used by companies that do well and need capital to grow. However, sometimes Private Equity can also be open for companies facing financial distress (but are operationally viable) and unable to do profitable investments due to lack of adequate financial resources. Mostly private equity capital is utilised in Turkey by non-distressed companies aiming to develop their existing business and by entrepreneurs wishing to exit the companies they have incorporated or take some ‘chips of the table’.

Which industries do Private Equity (PE) investors focus on in Turkey?

Private Equity investors sometimes do have industry preferences, but in general are pretty much open to most industries. More importantly they look at the management and the growth opportunities of individual companies. Some industries of specific interest in Turkey for private Equity are healthcare and transportation/logistics.

Legal issues when selling to Private Equity investors

It is important to get good legal advice when selling to Private Equity parties. This obviously also applies to transactions in Turkey. PE investors are interested in a good relationship with the management of the companies they invest in as they are both in it for the long run. Hence, they depend somehow on the management to increase the value of the company. A lot of legal items will be relevant. PE investors can create transfer restrictions on shares through shareholder agreements so both parties are as certain as possible about the long term cooperation. Tag-along and drag-along rights, and rights of first refusal are granted to limit transferability but also to enable a sale when the opportunity arises.

Long term plans of PE investors in Turkey

A private equity investor is a financial investor that is interested in financial returns and hence has an exit strategy at the moment of acquiring shares. He or she normally doesn’t want to stay invested in a company for ever. In general these investors want to exit between 5 and 7 years, but this period can also be longer. If the right strategic buyer comes by a sale might happen earlier.

Private Equity companies have the alternatives to sell their stake in a portfolio company or conduct an IPO for it’s portfolio company. A sale very often happens to a domestic or international strategic party which is from the same industry. Alternatively the company can also be sold to another private equity firm. For more info on IPO’s in Turkey please go to IPO Turkey.