Over the past two years, market volatility has caused investors to think twice before investing in Turkish assets. In an interview for Bloomberg in Turkey, Emre Hatem, head of Corporate Loans and Project Finance Restructuring at Garanti BBVA, discusses the country’s economic outlook for 2020 following 2019’s slump in transactions.
In 2019, overall deal value in Europe involving Turkish assets in Europe decreased by almost 20 percent, which together with market instability, sunk investor confidence to new lows. However, according to Emre Hatem, Chief Financial Officer at Garanti BBVA during an interview for Bloomberg in Turkey, the recovery in underlying market fundamentals starting from the last quarter of 2019 hints at a potential improvement in international investor appetite for Turkey.
In the interview, Hatem underscores that market stability will be a key driver of growth in merger and acquisition activity in 2020, and that the country’s brighter economic prospects – the country is poised to grow by 4 percent this year, according to BBVA Research’s estimates –will contribute to improve the perception of foreign investors. “In a stable business environment, we would expect currently available global liquidity and increased risk appetite to boost both the number and volume of M&A deals in 2020”.
We expect a strong appetite for energy projects
Asked about the most attractive sectors for this year, Garanti BBVA’s executive expects the main activity to focus on three types of asset classes: “The first group will be companies with high export or FX denominated revenue streams. During the last two years increased levels of volatility in FX markets have affected the companies with high FX open positions the most.
Meanwhile, companies with export revenues have been more resilient to adverse market conditions. The second group of assets will be large infrastructure projects developed under the Public Private Partnership (PPP) schemes. Last but not least, we expect a strong appetite for energy projects. Especially for renewable energy projects, like wind and solar power plants, benefiting from FX based feed-in tariffs.”
Garanti BBVA is the largest lender to wind power projects in Turkey with a market share close to 30%. Garanti BBVA Securities acted as the exclusive sell side M&A advisor in the Acquisition of 80 MW Zorlu Wind Portfolio by Akfen Renewables in 2019, which was the largest power plant M&A transactions taking place last year.
Finally, regarding the spike in interest from international private equity on Turkish assets, Emre Hatem explained that most private equity investors focused on preserving the operations and financials of their existing portfolios. “Most of the private equities currently holding Turkish assets have exceeded their regular five year holding periods and are eagerly seeking exit opportunities. The potential buyers for these assets will again be other private equities, either existing players or new entrants, whether domestic or international. Furthermore, the cash that these private equities will raise from these exits will most likely be used in purchasing other assets in the market. As such we may expect an increased level of activity in the private equity segments as well.”
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