Barış Öney
Private Equity investors first arrived in Turkey in 1995. The flow of funds increased its pace when Turkey started accession negotiations with the EU in 2004. Since then, approximately USD 15 billion of Private Equity Funds was invested into some 180 companies in Turkey.
Though Private Equity investors invested into 180 companies, this number represents just 3% of the total companies evaluated by them. This clearly shows that it is not an easy call to receive an investment from a PE Fund.
There is a reason for Private Equity Funds to evaluate many companies but invest into a much selected few. First of all these funds would like to invest at least USD 15-20 million per company, which means they want to invest into sizeable companies. There are one to two thousand companies in Turkey who could possibly fit in this criterion. This very fact forces these funds to focus on these few thousand companies, but these companies don’t necessarily require private equity money. Because these companies can finance their needs from other means and channels easily.
Another reason complicating private equity investing is the company valuations. Performance of Turkish companies increased considerably in recent years. Accordingly companies feel that they became quite valuable and demand high valuations.
However, there are lots of companies in Turkey who require this type of financing. There are approximately 500 thousand small to medium size enterprises that need private equity capital. The private equity need in Turkey actually lies for those companies, but Private Equity Funds don’t lean towards these companies due to their small sizes.
New opportunities might present itself for Private Equity Funds!
Latest developments in Turkey could create new opportunities for Private Equity Funds. Especially developments in 2014 will decrease the company values. Increase in interest rates might cause shrinking trend in loans. Under these circumstances, with more reasonable values, Turkish companies could feel warmer towards Private Equity Funds.
When to sell the shares?
After investing in a company, Private Equity Funds sell their shares to other investors after 5-7 years because of the nature of the business. The most suitable time frame for Private Equity Funds to sell their shares could be the last quarter of 2014. Companies should start their preparations for this because preparations require an extended period of time. Companies with private equity investors, who could finalize their preparations by the last quarter of 2014, could possibly sell their shares to good buyers and allow their investors to exit from their investments.
