Grandstanding Traction

Arda Kutsal's Webrazzi is now in English!

2009-09-25T15:25:00.005+03:00

Yes! For all English-speaking, technically-minded, gifted entrepreneurs as well as deal flow optimizers, VCs and angel investors for the Turkish market, good news has finally come - Webrazzi is now in English.

The "Techcrunch" of Turkey has been providing daily updates on the Turkish technology and startup scene since 2006. Arda Kutsal's very successful brain child Webrazzi appears to be doing well enough that he has finally branched out to the English speaking world - now called Webrazzi Global.

For those interested, the new link is:
Webrazzi Global
http://en.webrazzi.com/
Check it out!

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AIG Unties Turkish Blue Voyage Fund

2009-09-25T13:21:00.009+03:00

At the beginning of September, a contact from AIG sent a press release concerning the AIG Blue Voyage Fund - Turkey. As we all know, AIG has had some trouble of late, and it only seems natural that they should streamline their operations. Per the press release:

American International Group, Inc. (AIG) has announced an agreement to sell a portion of its investment advisory and asset management business to Bridge Partners, L.P., a company owned by Pacific Century Group (PCG), the Hong Kong-based private investment firm. AIG is retaining its in-house investment operation that oversees approximately $480 billion of assets under management.

The purchase price of approximately $500 million consists of a cash payment of approximately $300 million at closing, plus additional future consideration that includes a performance note and a continuing share of carried interest.

"After conducting an extensive and rigorous auction process, we concluded that this transaction provides fair value for AIG and achieves the greatest long-term stability and potential for the business, its clients, business partners and employees," said Alain Karaoglan, AIG Senior Vice President - Divestiture.

The units being sold operate in 32 countries and manage approximately $88.7 billion of investments of institutional and retail clients across a variety of strategies, including private equity, hedge fund of funds, listed equities and fixed income. Win J. Neuger will continue as Chief Executive Officer of the new business and the existing management team will remain in place.

This transaction includes the Blue Voyage Fund. Managing Director Serkan Elden remains at AIG Investments. The Blue Voyage Fund link has been removed from the Index.

For other Grandstanding posts regarding AIG and the Blue Voyage Fund, click on the labels below.

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RHEA Investments Joins with Stowbridge Partners; Purchases Vakif VCIT Shares

2009-09-25T11:02:00.011+03:00

RHEA Investments, a London-baseded private investment and project development company in the fields of real estate, health, energy, agriculture, and financial services, has made a few moves in the last month that should position it for permanency in the Turkish environment. RHEA Investments established a foothold in Turkey in 2006 and have made successful investments on a MediaMarkt project in Izmir as well as continuing development of hotel projects in various Turkish cities.

Posted about a month ago on the Linkedin group - Venture Capital and Private Equity in Turkey, Memet Yazici, group leader Head of Asset Management at Rhea Investments, makes two announcements regarding the future direction of Rhea Investments. First and foremost last month, RHEA Investments announces that it has joined forces with Stowbridge Partners. According to the post:

"Stowbridge Partners and RHEA Investment Group are joining forces to launch a venture capital and private equity management as well as a corporate advisory unit under the RHEA name. Accordingly, Stowbridge venture capital management and corporate finance advisory practices will merge with the RHEA team.

The new entity will combine the strength of RHEA’s business in the real estate, energy and healthcare sectors with the Stowbridge Partners’ extensive experience in Venture Capital and Small/Medium Enterprise Private Equity. Both teams share the same vision to produce superior returns and the same dedication to excellent execution.

RHEA’s primary office is located in Istanbul, Turkey with additional offices in London (UK) Chicago, Illinois (US), Bucharest (Romania), Izmir (Turkey) and Dubai (UAE).

At Stowbridge Partners, managing partner Kurtay Ogunc will continue his leadership and identify new opportunities for cooperation and collaboration between U.S. and the EMEA region.

About a year ago, Stowbridge Partners was taken off Grandstanding Traction's index (right sidebar) due to inactivity, or rather "off the radar". As of this announcement, they have been added again. Memet Yazici is also a board member of Stowbridge Partners.

Days after, RHEA Investments made another announcement regarding its agreement to purchase 31.15 percent of Vakıfbank's private equity operation Vakıf Venture Capital Investments Trust.

As mentioned in the Hurriyet Daily News, "The 2.1 million Turkish Liras deal is pending the approval of Turkey's Capital Markets Board, or SPK, and is likely to be finalized by the end of 2009. Vakıf Venture Capital Investment Trust was established in 1996 and listed on the Istanbul Stock Exchange in July 2000."

According to Memet Yazici on Linkedin, "RHEA has signed a definitive agreement with Vakif Bank to purchase all of the A type (controlling) and 6.15% B type (ordinary) shares of Vakif Risk Sermayesi Yatirim Ortakligi A.S. (Vakif Venture Capital Investment Trust), an Istanbul Stock Exhange listed joint stock company (stock code: “VKFRS” ). All of the remaining shares are trading on the ISE."

As quoted in the Hurriyet, "We will be particularly interested in cooperating with sector leaders, firms that are already first or second in their respective sectors, which have an ambitious global growth vision. Our goal is to grow the firms and exit them in some two to four years, like an average private equity investor would do," Yazıcı said. Rhea has already screened some 25 firms looking for an investment between 5 million and 20 million euros. "In addition to this, motivated by the construction of technoparks in Turkey in recent years, we are also planning to build a technology portfolio of some five companies," said Onur Takmak, Rhea Investment venture capital director.

Additional information can be obtained at: The New Energy World Network - Turkish renewable energy investment trust Rhea Investments acquires Vakif Risk Sermayesi Yatirim Ortakligi

Invest IQ - RHEA Buys controlling Share of Vakif Venture Capital

Rhea comes to Turkey with international corporate investors (TR)

Overall, this looks like a nice consolidation of the industry with some good heads at work. Vakif Girisim was looking to unload this subsidiary for some time now. In fact, Grandstanding Traction posted in 2008 an interview with CFK Partners who were intending the purchase the Vakif Girisim shares. CFK Halka Arz Partners website is still under construction, so this deal appears to have fallen through.

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Private Equity International Turkey Forum set for November 2009 in Istanbul

2009-08-14T11:35:00.009+03:00

That's right, this is the latest news about a very significant event. Scheduled for November 23 and 24 at the Hyatt Regency in Istanbul, Private Equity International and EMPEA are coordinating a Turkey Forum with the main sponsors being Turkven, the Actera Group and Abraaj Capital. Endeavor is also supporting the event. I know Golden Horn Ventures tried to do something like this a year ago, and it proved a valuable spearhead to get this type of conference moving in Turkey. While the event does not seem to be significant for venture capital or entrepreneurs seeking investment, it is good to see Turkey's prominent PE executives getting together to hash this one out. The agenda looks interesting, especially the panels that will discuss the great potential that the emerging market of Turkey will have for LPs and GPs. In addition take a look at this list of conference speakers:

Sarah Alexander, President, EMPEA
Achmed Al-Shahrabani, Senior Vice President, Abraaj Capital
Uğur Bayar, Managing Director & CEO, Credit Suisse Turkey
Mete Çakmakcı, TTGV
Murat Çavuşoğlu, Managing Partner, Actera Group
Can Deldag, Managing Director, The Carlyle Group
Serkan Elden, Managing Director, AIG Capital Partners
Saki Georgiadis, Investment Director, Gartmore Private Equity
Tolga Işmen, Lawyer, Ismen
Salim Kadıbeşegil, Chief Executive Officer, ORSA Strategic Communications Consultancy
David Nieuwendijk, Senior Investment Officer Private Equity, FMO
Murat Özgen, Chief Executive Officer, İş Private Equity
Carlos Perry, Chief Operating Officer, EMPEA
Jose Romano, Head of Turkey & Istabul Venture Capital Initiative, European Investment Fund
Nikos Stathopoulos, Managing Partner, BC Partners
Seymur Tari, Managing Director, Turkven
Selcuk Yorgancioglu, Executive Director & Turkey Country Head, Abraaj Capital
Birol Yücel, Managing Director, Turkven

For most of you who have followed Grandstanding Traction over the last few years, I think you can see the significance right away about what this conference means for Turkey and the growth of private equity. What I wouldn't give to be a potential GP with a private placement memo ready to go for this event. So for all those interested in putting together a fund, dust off your elevator pitch. Registration for the PEI Turkey Forum will cost you a pretty penny.

The question will remain, "Will those types of high net-worth individuals from Turkey come out for this event?" I encourage all who are interested in making investments in Turkey to attend this event. Private equity is cyclical, and Turkey has some thriving industries yearning for investment since the recent downturn. The website specifically states that all types of institutional investors will be given complementary tickets, so we can already see the potential waiting for GPs at this event. All the relavant players will be there - so should you.

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Turkey wants to export the idea of investing in firms and running them?

2009-06-15T01:24:00.004+03:00

Can anyone tell me what the OYAK chief is talking about? Most likely another lousy report translated in English by our fine Hurriyet expose-journalists.

Export concepts, says OYAK chief

MARDIN - OYAK, Turkey’s leading pension fund which is active in automotive, steel, cement and energy, may ’export’the formula that made it a success over the past nine years, according to Chairman Coşkun Ulusoy. ’Imagine the name of any major private equity fund or pension fund worldwide, and I can guarantee you we are talking to them,’Ulusoy says.

At a time of plummeting exports amid global recession, the chairman of Turkey’s leading pension fund suggested a novel means to economic revival over the weekend: "export of concepts."

Selling a Turkish business model abroad might sound a bit far-fetched. But Coşkun Ulusoy, head of the military pension fund OYAK made it clear at his annual press briefing that this was the next project up his sleeve.

"Imagine the name of any major private equity fund or pension fund worldwide, and I can guarantee you we are talking to them," Coşkun told a gathering of business reporters and editors assembled at an OYAK’s Mardin Çimento cement factory in this historic city. "We can export concepts."

At the moment, OYAK’s exports are limited to cement, steel and cars and light trucks from its Renault-Mais division. Its 50-odd companies dominant in basic industries turned a profit of $2 billion last year and despite the harsh economic environment Ulusoy predicts the group will again be profitable this year.

But, he explained, the fund’s longer-term success may well come by selling the formula that made its remarkable success over the past nine years possible. That success, he argued, is in the fund’s unique daring to eschew the passive investment strategies of comparable pension funds in favor of a strategy of taking majority interest in firms, joining the management and actually running them.

"This is a unique model of success and its also uniquely Turkish," Ulusoy told an informal three-hour gathering. "If Turkey is going to export something, let’s export this model."

(I believe this is called private equity!?!)

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In this crisis, what should central banks be thinking about hedge funds and LBOs?

2009-04-22T01:49:00.006+03:00

Hello World! Sorry about the long hiatus once again, but I've been busy. It appears though that the recent downturn has not left me much to talk about really other than a few conferences here and there as well as people inquiring about work. So to go in another direction, I thought I would post something I just wrote up regarding hedge funds and LBOs and how it may concern central banks. Please note, I've posted my linkedin profile badge on the right if you feel like you would like to make contact. Cheers!

Hedge Funds May Be Usurping Central Banks Authority

Generally, Leverage Buy-Outs occur when the LBO or private equity firm borrows “or leverages” funds in order to take a controlling stake in another firm. Usually the target firm has hard physical assets and somewhat steady cash flows, or management of the target firm has orchestrated the takeover. The assets of the targeted firm are used as collateral to secure the debt taken on by the LBO firm. In some cases, firms that are bought out are private corporations, but in other cases, public firms are leveraged, bought out and taken private.

When a leverage buy-out occurs, certain issues may arise depending on the two firms’ situations. Managers orchestrating an LBO, according to Ross, Westerfield, Jaffe and Jordon, will tend to work harder since they now own a substantial portion of the business, thus reducing the agency cost of equity (2009). We already know that LBOs will customarily buyout shareholders at a price above market value, but this still leaves the area of manager’s insider information up for speculation and future research. Indeed, the fact that managers chose to buyout equity using leverage suggests prior knowledge to the fair value of the firm and begs the question whether the price paid to shareholders was at a premium or still undervalued. This also is the classical dilemma of shareholder asymmetric information when shareholders choose to sell their shares.

Historically, private equity firms have existed because limited partner investors have trusted them with their funds to make wise investments buying out firms and making a return on this investment. The objective of the PE firm and its investors is generally very clear. Now, enter the hedge fund. Hedge funds, equally, have investors that seek returns on their investments. However, hedge funds survive on making a wide variety of investments in commodities, stocks, debt and so forth, depending on the strategy of the firm. Here lies an area of ambiguity for investors and on regulation of hedge funds. Portfolios of hedge funds and strategies may change very quickly depending on market conditions, and investors need to be aware of this. Furthermore, hedge funds have been in the limelight as of late in their recent appetite for leveraged takeovers. To give an example, here is an excerpt from Reuters in 2007:

Just two years ago [2005], Henry Kravis, co-founder of buyout firm Kohlberg Kravis Roberts & Co. (KKR), speaking at a conference in Frankfurt, said hedge funds were good stock pickers but should be kept out of investing. "Hedge funds are not set up to build value in companies over the long term," he told an audience of private equity firms and their investors. Fast forward to last January, when KKR was involved in the buyout of for-profit education company Laureate Education Inc. Joining KKR in the investor group was S.A.C. Capital, among the largest hedge funds in the world. (Flaherty)

According to AIMA’s Roadmap to Hedge Funds, the hedge fund industry may have managed $2.5 trillion dollars at its peak in the summer of 2008 (Ineichen). As you can see, hedge funds comprise one of the largest asset classes under management. Interestingly enough this is about the size of the damage in the current US recession, but this is beside the point. Thus, it may appear obvious that central banks of various countries and government regulators are a little concerned when it appears that hedge funds may be stepping outside of their mandate stipulated by their limited partners’ PPMs.

Research has shown that hedge funds are taking on an active role in investing in firms with potential for LBOs (Huang, 2008). Based on a hedge funds initial investment, an LBO offer is more likely to occur than with any other investment institution and also shows signs of a significant increase in premium paid for the firm when a hedge fund is present. Having said this though, when there is an LBO boom, hedge funds that do partake in LBOs experience abnormal returns.

As Farrell and Lund (2007) so eloquently put it, "The rush of cash emanating from these players could be fueling asset-price bubbles. Private equity and hedge funds could create new sources of financial-market instability, including higher credit risk and a greater change of "systemic risk" in which one or more large hedge fund failures start a dangerous ripple effect across global capital markets—as occurred in 1998 with the near collapse of Long-Term Capital Management. Because all these players are lightly regulated, they can move huge amounts of money beyond the scrutiny of financial-market authorities."

For a hedge fund to use its funds to lend on a LBO, in a sense, the hedge fund is extending credit much like a bank would. This is cause for concern, since in some cases, a hedge fund’s investors may have been banks themselves who are regulated under a countries central bank. This also means that the cost of debt must either be evenly and competitively matched with other lending institutions or it might be simply more expensive. Thus, here lies another crux of the issue. Banks’ interest on lending is stipulated by central banks of the particular country. In contrast, hedge funds can stipulate their own lending terms simply depending on their desired return, thus taking the central bank out of the equation. So, we have an institution that is lending massive amounts of currency like a bank, but is not regulated like a bank. In addition, hedge fund investors are taking on added risk of paying for above market value stock for companies and entrusting third-party LBO firms to manage their exits. Finally, the public markets exist to allow firms to raise funds by selling portions of equity. By taking more firms private through debt acquisition, the “ethos” of companies’ capital structure- debt vs. equity, not to mention the public market’s existence, is circumvented. When more and more companies are supported by money that was created outside of the central banks control, this affects the central bank’s ability to control monetary supply.

Notwithstanding the recent credit debacle and the “fall” of the hedge fund industry, it is no wonder that regulators were starting to question the methods of hedge fund techniques and beginning to legislate more surveillance. Throw the recent crisis into the mix, and you have plenty of reason for more legislative rigour.

References: Farrell, Diana and Lund, Susan. “Power Brokers” Newsweek International, October 20th, 2007. McKinsey Global Institute.
http://www.mckinsey.com/mgi/mginews/powerbrokers.asp

Flaherty, Michael. “Hedge fund-LBO alliances deepen” Reuters.com. April 9th, 2007. http://www.reuters.com/article/GlobalHedgeFundandPrivateEquity07/idUSN0245257020070409?pageNumber=2

Huang, Jiekun, “Hedge Fund Activism in Leveraged Buyouts” (December 15, 2008). Available at SSRN: http://ssrn.com/abstract=1086687

Ineichen, Alexander and Silberstein, Kurt. “AIMA’s Roadmap to Hedge Funds”. November 2008 The Alternative Investment Management Association. http://www.aima.org/download.cfm/docid/6133E854-63FF-46FC-95347B445AE4ECFC

Ross, Westerfield, Jaffe, Jordan. Corporate Finance: Core Principles and Applications. 2nd Edition. McGraw Hill International 2009. P. 472.

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Turkven Makes Investment in Mavi Jeans - October 2008

2008-11-25T16:22:00.006+02:00

NOTE: To all my readers, I'm sorry for the recent hiatus in updates, but during the course of a full time job and starting a masters program, I've had little time for anything else. Needless to say, we are amidst an economic conundrum of sorts, but that doesnt mean that things have come to a standstill. When times look most bleak, we must all remember the cyclical nature of things.

Also, I would like to point out that my blog as well as the millions of other Blogger blogs were blocked by a court ruling inside of Turkey during a weekend in October. Apparently, the local satelite provider needed to block a blog that was posting videos of football matches, and we all got thrown in the same basket. In addition, it appears that Dogan Media has decided to envelop all of the Turkish Daily News and will no longer be running their website. Unfortunately, a lot of my previous posts have links to the TDN and will no longer work - for that I'm sorry, but it is out of my control. Life is like this sometimes.

So, in doing some housecleaning, I would like to publish the press release in its entirety from Turkven that came out in October 2008. What can we take away from this venture? Was it a last ditch effort for TVPE II to get deals done before the sh*t hit the fan? Equally, on both sides of the boardroom table, this very well could have been of critical importance for Mavi to find liquidity. Do you consider a jeans maker a conservative or risky investment at this stage? Albeit a very competitive market, perhaps the terms of the deal were too good to pass up.

TURKVEN INVESTS IN MAVI
October 2008

Turkven has acquired a stake in Mavi, the leading Turkish apparel brand.

Founded in 1991 by the Akarlilar family, Mavi has operations in 27 countries through a retail network of 190 stores generating over US$150 million of sales in 2007.

Ersin Akarlilar, Executive Board Member of Mavi said: "Mavi’s ambition is to become a US$1 billion company with a global brand and retail operations. We have partnered up with Turkven to leverage their network and operational expertise to achieve our goals."

Turkven Managing Director Seymur Tari said: "Mavi will build on its strong denim heritage to grow into a global lifestyle brand. Mavi is a pioneer, and it serves as a role model for Turkish companies with its brand, design capability and global ambitions."

Turkven Principal Kerem Onursal added: "We are an industry leader with a track record of investing in industry leaders. Our experience allows us to look beyond the short term volatility to identify sustainable businesses with a potential to create substantial shareholder value."

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Turkey's Privatization Program: Scheduled Privatizations as of 2008

2008-09-29T12:16:00.006+03:00

Courtesy of Guner Law Office and Mondaq, this publication (membership required) provides the latest updates on Turkish Law and the current economics environment, most notably, a scheduled list of potential privatizations slated for 2008 and 2009.

More information can be found at Turkey's Privatization Administration (OIB)

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Ughh! Turkish Investment Copes With The Global Crisis

2008-09-19T13:38:00.010+03:00

With nothing good to talk about these days on the global front, the question needs to be asked, "Who are going to be the last ones standing?" Lehman bankrupt, Merrill Lynch helped out by Bank of America, Morgan Stanley and WAMU looking for buyers, the US bailouts of Freddie Mac, Fannie Mae and now AIG - these past weeks have left everyone in awe of the historical proportions. Historic in the sense that the government is stepping in and stewarding companies - historic in the sense that the government has put a hold on all short selling - historic in the sense that people are drawing comparisons and even mentioning the Great Depression! You have to ask yourself, when was the last time any of this happened before? Next we need to ask, "Who is to blame?" Is it the simple prudent investor who couldn't pay his morgage? Is it the lender who kept adding the tightly-wound-up deals to the portfolio? Is it the leveraging of that risk to others that maintained the confidence? Somewhere the fundamentals told us to take an extra step and put an extra risk-free card on this house of cards.

So I figured I would revert this post to somewhat of a newsletter format to let the reader browse and drill down through the applicable and relevant news regarding Turkey. News is provided courtesy of the Turkish Daily News. Here goes:

Turkish economic growth slumps to slowest in six years

Turkey's economy grew at the slowest pace since the country emerged from a recession six years ago as higher interest rates and the threat of political instability hurt consumer spending. Gross domestic product growth slowed to 1.9 percent from a revised 6.7 percent in the previous quarter, the state statistics office in Ankara said yesterday. The pace of growth in the European Union membership candidate slowed as the global credit squeeze damped demand in export markets and the Central Bank added to the cost of borrowing.

Corio cancels $1 billion-worth of investment in Turkey

Corio NV, the largest Dutch developer, will drop plans to develop $1 billion-worth of shopping malls in central and eastern Turkey, and focus instead on the country's biggest cities.

R&D spending puts Turkey on the map

Turkey ranks 25th out of the world's 41 highest-spending countries on research and development, a recent report revealed.

Urla to have its Silicon Valley

İzmir's Urla district is about to become a leading spot for Turkey's technological developments, as a French firm, CICOM, which supports technology zones in different countries, signs a contract with the Institute of High Technology to make 4 billion worth investment.

Tekfen sells 50 percent share to Palmali-Socar

The partnership between the Azerbaijani Palmali Company and Azerbaijan's State Oil Company, or Socar, has bought 50 percent of the construction arm of Tekfen Holding A.Ş., a Turkish builder and power generator, for $520 million.

Turkish businesses on alert over global crisis

The United States credit crisis, which is having an increasing impact upon the global financial community with each day, has recently become a top priority on the Turkish business world's agenda. As the U.S.-born crisis spreads through Europe, officials are also keeping a close eye on the Istanbul Stock Exchange, which has lost approximately 15 percent of its value in the last five days.

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Abraaj Capital Acquires Luxury Yacht Maker - Numarine; Summary of Gulf Nations Investment in Turkey

2008-09-04T09:41:00.010+03:00

Istanbul, August 27 2008: Dubai-based private equity firm Abraaj Capital has acquired a 50 per cent stake in Turkish luxury-yacht manufacturer Numarine, as global demand grows in the US$ 25 billion market for recreational boats.

Abraaj, the largest private equity firm in the Middle East and North Africa, will partner Numarine Chief Executive Officer Omer Malaz, who founded the company in 2002.

The investment is Abraaj’s second in Turkey and third in the marine business. Last year, it bought part of Acibadem, the only healthcare provider listed on the Istanbul exchange. Abraaj also owns stakes in Dubai-based luxury-yacht distributor ART Marine, and Gulf Marine Maintenance & Offshore Company.

"We are delighted to partner with Omer and Numarine, and believe that the company is extremely well positioned to benefit from growing demand for high quality, excellent value motor yachts," said Abraaj Managing Director Mustafa Abdel-Wadood.

Global demand for recreational boats, which grew 11.4 per cent per year between 2000 and 2006, is expected to rise further, with Turkey’s market share expanding as it matches or exceeds comparable international makers in technology and style at more competitive prices.

Demand for yachts in the Middle East, for instance, has soared in the last few years, with the region now accounting for 8 per cent of global owners, compared with almost zero a decade ago, according to the Global Order Book 2008 survey.

Numarine targets an income more than 30 million Euros by the end of 2008 and more than 40 million Euros in 2009.

Numarine will use the capital injection to expand its production facilities, as well as boost research and development, and product design.
To read more, visit Numarine's press release.

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In other news the TDN posted a rather summarized update (Turkey the winner in Gulf's investment hunt) of the latest acquisitions in Turkey from the Gulf region, as Gulf-based capital investment volume has reached $30 billion. I should warn you that some of these deals go as far back as 2006, but I felt it was interesting so I am posting the highlights as well as added links for you to drill down :

National Bank of Kuwait expands in Turkey with the Conclusion of a 40% Acquisition of Turkish Bank
Kuwait Investment Authority has acquired Cevahir Business Center.
Emaar Properties, owned by the Sheikh of Dubai El Maktoum, is planning a $5 billion-worth investment in Turkey by 2010, focusing on healthcare, shopping malls, hotel and real estate areas.
Abraaj Capital, an investment firm specializing in private equity investments in the Middle East, North Africa and South Asia, partnered with the Acıbadem Hospital (press release - pdf) and then the Numarine yacht company.
Dubai Islamic Bank opened a representative office in Turkey.
The International Investor, a Kuwaiti investment group, acquired 75 percent of the share of Docar, a Turkish car rental company, for $24 million. The company is planning to found a consumer financing company as well as looking into second-hand vehicle sales, financing and participant banking.
The Arab Banking Corporation opened a representative office in Turkey. The firm may yet acquire a Turkish Bank.
Oger Telecom acquired Türk Telekom for $6.5 billion.
Kuwaiti Alshaya Group, which brought prominent global brands such as Starbucks Coffee, The Body Shop, Topman and Topshop, is planning a $100 million-worth investment in Turkey in three years.
Kuwaiti International Leasing Investment founded Haliç Leasing with $5 million capital. The group is looking to operate as an investment bank in Turkey.
Dubai Islamic Bank acquired MNG Bank.
Dubai Multi Commodities Center, or DMCC, plans to enter Turkey's gold and tea markets.
The National Commercial Bank, or NCB, the biggest bank of Saudi Arabia, acquired Türkiye Finans.
Kuwaiti investment group The International Investor acquired Adabank.

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Endeavor Turkey's 2008 Entrepreneurs

2008-08-26T15:03:00.004+03:00

At the beginning of the summer, Endeavor Turkey announced its 2008 Endeavor Entrepreneurs. I felt that covering this story not only reflects the tenacity and success of Turkish entrepreneurship, but also proves the existance of hot deals for venture capital and potential acquisition. Indeed, it is no mystery that some of Endeavor's 2007 winners, which I wrote about, had no problems with securing continued funding, were acquired, or had sufficient growth in the year that followed the award. In another example, AirTies, one of Endeavor's 2006 winners, after the award, secured $3.1 million from four angel investors. Endeavor provides selected entrepreneurs with customized services from highlevel business mentors, Fortune 500 consulting firms and top U.S. business schools. The goal is to help these entrepreneurs scale their businesses and reach their highimpact potential.

The 2008 Endeavor Turkey's Entrepreneurs are:

Artesis – Ahmet Duyar:

It's product, the MCM (Motor Condition Monitor), "provides early warning of progressively deteriorating machine and process conditions, thereby maximizing a plant’s available assets through reducing unplanned downtime, and improving revenue and savings," said Ahmet Duyar, CEO of Artesis. "In addition, MCM provides information about the quality of the incoming power, energy consumption as well as the abnormalities in the plant."

MCM is a unique solution that safeguards rotating machinery from common faults, both electrical and mechanical, such as misalignment, imbalance, bearing faults, short-circuits, etc. by measuring only voltages and currents. Applications include sectors of iron and steel works, glass plants, power generation plants, water departments of municipalities, cement plants etc.

A subsidiary of Arcelik A.S., the company is dedicated to the research and development of state-of-the-art systems for quality assurance and condition monitoring.

It received the "Editor's Choice Award" by the Control Engineering Magazine published in the USA stating that it was amongst the 40 best products in 2000.

This patented core technology, a result of a 25 year-long research effort, has previously been applied in the US at NASA.

Bizitek – Murat Şahinoğlu & Kerem Erdem:

Bizitek was founded in 2000 as a subsidiary of Probil to provide companies with e-business end-to-end customer and solution oriented software, consulting services to achieve maximum efficiency, and turn changes in technology to a competitive advantage. Since 2004 Bizitek has grown by providing quality business solutions to Companies in Turkey and around the world.

Monopoli Sigorta – Erol Esentürk & İzzet Bonofiyel:

A new kind of insurance agency, buying and reselling insurance - one insurance policy for multiple needs online.

Speedcity – Ahmet & Ali & Canan Özgün:

This is a motorsports enthusiast's entertainment destination, hosting all motor racing products, clothing and accessories, simulation games, as well as a cafe.

Türkmix – Aydın Şeker & Damla Gönül & Elda Maraşlı:

By the looks of its website, Türkmix strives to be a high quality fast-food restaurant chain. With simple menu options, this could be the "McDonaldization" of Turkish food.

The finalists were chosen by the following Endeavor panelists:
Mehmet Ali Babaoğlu (Türkiye, Füsun Tasarım),
Ali Koç (Türkiye, Koç Holding),
Cansen Başaran-Symes (Türkiye, PwC),
Alvi Mazon (Türkiye, Arena Bilgisayar),
Khaled Bichara (Egypt/Italy, Wind Telekom),
Edward Mishrahi (England, Eton Park Capital),
Nick Beim (USA, Matrix Partners),
Dan Och (USA/Och-Ziff Capital),
Murat Özyeğin (Türkiye, Fiba Holding),
Fadi Ghandour (Jordan, Aramex),
Naguib Sawiris (Egypt, Orescom),
Aly Jeddy (USA, McKinsey),
Brian Swette (USA, Burger King),
Paul Harris (South Africa, FirstRand),
Shwan Taha (Türkiye, Melak Danışmanlık),
Işık Keçeci Aşur (Türkiye, Aragon Capital),
Mahmut Ünlü (Türkiye, Standart Ünlü),
Fadi Nahas (Türkiye, Everfresh)

About Endeavor
Endeavor breaks down barriers that prevent emergingmarket entrepreneurs from reaching their highimpact potential. Hailed by NYT columnist Thomas Friedman as the "mentor capitalist" model, Endeavor identifies entrepreneurs leading highgrowth, innovative companies in emerging markets. These entrepreneurs are given worldclass strategic advice, access to key networks and other tools that will catapult them to success. With Endeavor's guidance, they become “highimpact” – creating jobs, generating wealth and inspiring others to innovate. Often overlooked, these local entrepreneurs are jumpstarting private sector development in their countries.
Endeavor June 9th, 2008 Press Release (PDF)

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Conflicting Reports on Turkey's Economic Slowdown in 2008: Ernst & Young, Iş Private Equity, Deloitte Touche Turkey

2008-07-28T10:32:00.014+03:00

Ernst & Young Says Shopping Center Boom is Over!

This last May, Ernst&Young Turkey's managing director Osman Dinçbaş came out and said that Istanbul had reached the famous number of 100 shopping centers: a number that was predicted to meet Istanbul's demand. He even went on the say, "Taking those under construction into account, the number of malls will rise above 100. Can the city handle such a number? I believe a crisis in our country will stem from this."

Interesting perspective in this article, but having lived in this city, I'm sorry, but I kind of have to disagree. Very cautious. While there still might occur a crisis in Turkey, this will be a result of other issues. Decline of retail receipts will only occur after the fact. Maybe he should visit Carrefour on a Saturday afternoon? Compared to Europe, Turkey is still well below the number of square meters/population. I wrote about some of this last year: The Shopping Center Boom in Turkey

Iş Private Equity Sees Continued Inflow and Strong Growth

Also printed in May of this year in the TDN: İş Private Equity forecasts growth

Private equity funds investing in Turkish firms will continue to grow and yield strong returns in 2008, Murat Özgen, chief executive officer of İş Private Equity "The current year will be another bullish year for private equity in Turkey and will follow the footsteps of 2006 and 2007," Özgen said. "We will see couple of mega funds entering the market and doing buy-outs.

Although he is somewhat bullish about the year, he still admits that granting bank loans and finding leverage might be difficult. I guess the question remains that eventhough private equity is cyclical and may have problems in the short-run, if there is a crisis on the horizon from global causes, how short will it be and when will it come? Can Turkey weather the storm?

Deloitte Touche Turkey Releases Private Equity Confidence Survey for 1st Half 2008

This just out in the TDN: Investor confidence declines, says Deloitte

According to the survey, "Some 75 percent of investors who participated in the survey expect the overall economic climate to continue its decline, and none foresee an improvement. Only 25 percent of private equity investors that participated in the survey believe the overall climate will remain unchanged, the report showed. That figure stood at 55 percent in Deloitte Turkey's previous survey six months ago."

Interestingly enough, according to the report, the overall view is that deal volumes will remain about the same, but that transaction multiples will be lower.

For a full read on this free report, visit:
Deloitte Turkey Report page, or
Download it here: (PDF)
Private Equity Confidence Survey (PECS): Survey for the 1st half of 2008

Deloitte puts out some pretty amazing reads, and this is no different. So, coupled with Turkey's political turmoils, and the global slowdown, Turkey will be hard pressed to get ahead this year.

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Carlyle Group Gets Its Feet Wet In Turkey: Aquires 50% of TVK Shipyard

2008-07-28T10:05:00.007+03:00

Yes, I know it has been awhile, and I'm sorry for that. I'll try to feed the most recent stories that have occured this summer.

It seems Can Deldag of Carlyle Group in Turkey has come through with his words last spring. We knew that Carlyle had something in the works that would bear fruit this summer.

At right, you can see (L-R) Walid Musallam, head of Carlyle Middle East and North Africa, Can Deldag, director of Carlyle Turkey and Can Topsakal, TVK board member.

The most relevant stories are from suprisingly the Hurriyet's English division:
Carlyle group acquieres 50 pct of Turkey's TVK
and a somewhat comical TDN report:
Carlyle Group partners with TVK

When interviewed by Reuters, Can Deldag had this to say.

"We can easily complete 2-3 investment projects in the next 18 months. These could be companies operating in health, logistics, transport and non-food retail sectors," Deldag said.

"If we have the opportunity we could invest in other companies, including non-bank financial firms too," he said.

Carlyle, which has assets worth $82.7 billion globally, did not set up a separate fund for its investment in Turkey but has a global fund worth $35 billion to finance such investments.

"We do not plan to get out of our investments in Turkey in 1-2 years. We're looking at it with a longer perspective," Deldag said.

The company planned to prepare TVK for an initial public offering (IPO) by 2010, after capital injection and corporate governance have been put in place, he said, adding that it might invest in other ship building companies.

Deldag saw private equity investments in Turkey rising in the coming years. "Under the current circumstances, there's no reason why Turkey should not attract $3-5 billion private equity investments from 2009 annually," he said.

I know some of you had asked for any pertinant information on Carlyle and their activities in Turkey, but this is the best that can be put together at the moment.

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Teknoloji Yatirim A.S. Launches New Website

2008-06-16T11:12:00.007+03:00

From what I understand, TTGV, the Turkish Technology Entrepreneur Fund has spun out Teknoloji Yatirim A.S. and has been operating for some time now, although TTGV still exists.

With that Teknoloji Yatirim A.S. (www.teknolojiyatirim.com.tr) has launced it new website. Teknoloji Yatirim A.S. has a fund size of $5 million, and so far, three companies in its portfolio. The fund is investing in startup\entrepreneurs in the Technology and Biotech arenas. Interestingly enough, it makes sense that Dr. A. Mete ÇAKMAKCI is the wise chairman at the helm, descending from TTGV, and Haluk ZONTUL is CEO. In addtion, it seems Evren UNVER, co-founder of Turkven, is also a board member.

I would like to thank by readers and friends at Teknoloji Yatirim A.S. for submitting this. The private equity/VC Index on the left sidebar has been updated.

And with that, the VC pool in Turkey just got a little bit bigger.

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PDF Kurumsal Acquired by Taib Bank BSC

2008-06-16T10:46:00.005+03:00

Earlier this month, according to Bloomberg, Taib Bank BSC, the Bahrain-based investment bank controlled by Dubai's ruling sheikh, said its Turkish unit bought Istanbul-based corporate finance advisors PDF Kurumsal Finansman Danismanlik Hizmetleri AS.

Taib Yatirim AS, the brokerage unit of Taib YatirimBank, bought PDF in cash and shares to expand its investment banking services in Turkey, Taib said in an e-mailed statement, without disclosing the price.

Taib's Turkish broking unit will be renamed Taib-PDF Menkul Degerler AS, the statement said.

"We are proud to have the PDF team join us to create the strongest corporate finance offering in Turkey," said TAIB Bank chief executive officer Iqbal G Mamdani.

Taib Bank is a unit of Dubai Financial Group, which is part of Sheikh Mohammed bin Rashid al-Maktoum's Dubai Holding LLC.

PDF is an Istanbul-based corporate finance advisory firm renowned for its Turkish market leadership in merger and acquisition activity, advisory services, tender offers, distressed debt management, privatisations and project financing.

To conclude with some last remarks, this looks like another foreign broker looking for playing time in the Turkish market, and with the experience of PDF, TAIF looks poised to get a piece of the M&A activity as Turkey blossoms.

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Update on Participation Banking in Turkey: 2008

2008-06-16T10:12:00.007+03:00

Stepping away somewhat from private equity, I would like to extend to my readers an article concerning Participation (Islamic) Banks in Turkey. This article was written and submitted to me by good friend, Paul Wouters, consultant at Bener Law Office in Istanbul, Turkey. Although, it has been sometime since it was first printed, the information contained is still relevant, and gives good insight to the Participation banking industry in Turkey.

This article was first published at www.islamicfinancenews.com on April 18, 2008.

Paul WOUTERS is consultant to Bener Law Office, Istanbul - Turkey and can be reached at paul.wouters@bener.com.tr

----------------------------------------------------------------------

All eyes set on Turkey

The Chief Prosecutor of the Turkish Supreme Court of Appeals - Abdurrahman Yalçınkaya - submitted on March 14th an indictment to the Constitutional Court aiming to shut down the governing Justice and Development Party (AK Party) on the grounds that it had become a focal point of "anti-secular activities". The indictment also envisages banning 71 of its members for 5 years from political party membership - including President Abdullah Gül and Prime Minister Tayyip Erdoğan.

One of the elements that appear to have been withheld by the Chief Prosecutor would be a speech delivered by Prime Minister Erdoğan in Malaysia, where he is said to have commented that as a moderate Islamic country, Turkey could serve as an example for the alliance of civilizations.

The Turkish Constitutional Court announced that it will hear the case. The decision was taken unanimously with 11/11 votes. The case against President Gül – who supposedly only can be tried for treason – was approved with 7/11 votes.

The case has shocked the world, moreover since the AK Party was the most moderate and democratic party of its kind ever in Turkish history. Only 7 months ago, the party came to the government through democratic elections, claiming 47 % of the popular votes. Strong disapproving reactions were specifically noted from the European Union that announced that the accession talks could be hindered if not endangered would the AK Party be disbanded.

The government appears not to be influenced by the ongoing procedure and is set to continue the present modernisation of the Turkish judicial and economical environment. A mini democracy reform package has been put forward and the calm leadership of the governing AK Party resulted in the absence of any overheated reactions. It may be expected that – though some further violent confrontations by opposing activist groups and individuals might be launched during the months to come – the government will succeed to control the situation.

The indictment appears to be construed in a very broad way and not to focus entirely on a few specific facts or allegations. Therefore surprises might pop up unexpectedly at any time and the outcome of the litigation cannot be predicted for sure. The AK Party prepares for its defense and also for a change of the Turkish Constitution that would make the ban of political parties more difficult in the future and that will lift the difficulty of such closures to European standards.

The participation banks are not expected to be hindered by or involved in the present discussions and their growth will most probably follow the general Turkish market fluctuations as usual.

GENERAL

During 2007 the business volume of the Turkish participation banks increased by 30-35 percent and a similar growth is expected to take place in 2008, said Osman Akyüz, the CEO of the Turkish Participation Banks Association.

The sector is waiting impatiently for the much needed Sukuk regulations. Considering the present global credit crunch and the consequences thereof, it will be clear that already lots of good opportunities already have been missed.

ALBARAKA TURK

Albaraka Türk has absorbed the IPO from 2007 in good order and was able to raise the net profits by 50 % in 2007 over the previous year to YTL 85 million (approx USD 65.4 million).

Total assets increased by 48 %, to YTL 3.7 billion (approx USD 2.85 billion), and total loans increased by 44 % to YTL 2.85 billion (approx USD 2.2 billion). Deposits saw a 39 % increase, reaching a level of YTL 3 billion (approx USD 1 billion).

BANK ASYA

Publicly listed since 2006, Bank Asya increased its net profit in 2007 to YTL 221 million (approx USD 170 million), a 51 % increase as compared to 2006.

The capital equity of Bank Asya increased by 35 % to YTL 854 million (approx USD 657 million) and that its total assets reached YTL 6.26 billion (approx USD 4.81 billion), a 50 % increase as compared to 2006.

Deposits in the bank increased by 47 % to YTL 4.7 billion (approx USD 3.6 billion).

KUVEYT TURK

The Kuwaiti-Turkish joint-capital participation bank Kuveyt Türk announced that it had increased its profits in 2007 by 109 %, totalling YTL 74.1 million, compared to the preceding year 2006.

Kuveyt Türk CEO Ufuk Uyan explained that the bank had reached a historically high profitability rate and aimed to grow by 59 % in total assets, to YTL 6 billion (approx USD 3.8 billion), and by 63 percent in loans extended to YTL 5 billion (approx USD 4.6) in 2008. End 2007 Kuveyt Türk had around 1,800 employees and this figure is said to increase to 2,189 this year. 25 New branches are expected to be opened, bringing the total number of branches to 113.

Due to the ongoing uncertainty in the global financial markets, the IPO that was planned earlier this year has been delayed. No new date has been fixed yet.

TURKIYE FINANS

Still privately owned, Türkiye Finans aims for 30% growth in assets in 2008, 27 % growth in capital and 46 % growth in loan issuance. The goal for YTL 203 million (approx USD 156 million) in profit before taxes could be hindered by the raise in the value-added tax imposed on leasing transactions at the beginning of 2008.

Yunus Nacar, the CEO of Türkiye Finans said leasing was one of the primary tools of participation banks for financing new investments: “This latest regulation [tax rise] not only blocks the usage of an important financial tool, but also decreases the accessibility of loans with 48-60 month-long maturity periods for small entrepreneurs.”

The bank aims to increase the number of branches by 27 % from 138 to 175 and intends to hire around 1,000 employees, bringing the total number of employees from 2,500 to 3,500.

Thanks to outstanding performance in the previous years, the bank had attracted the attention of foreign investors and received not less than 15 merger and acquisition proposals. After it had been agreed to sell a 60 percent stake to Saudi Arabia-based National Commercial Bank NCB in July 2007 and the transaction was approved by the Turkish banking regulator BDDK early March 2008, the factual hand over proceedings were completed at the end of the same month.

At those formalities, NCB CEO Abdulkarim Abu Al-Nasr stated that the partnership with both the Boydak and Ülker groups would offer great opportunities. There is a growing global interest in interest- free banking and there still is much more potential that can be tapped in Turkey. Besides access to larger financial resources and business accomplishments, the cooperation is expected to result in a substantial transfer of know how and a fast implementation of the latest IT banking techniques.

QATAR ISLAMIC BANK - TURKISH BANK

Just now, end March 2008, Qatar Islamic Bank announced to be filing an application to run a participation bank (Islamic bank) in Turkey. It would be the fifth license of its kind and a valuable addition to the market.

The partnership talks between the National Bank of Kuwait NBK and Turkish Bank, established in 1982, have ended positively. NBK, a leading finance cooperation of the Gulf Cooperation Council's (GCC), will buy 40 % of Turkish Bank's shares for USD 160 million.

Turkish Bank is a conventional operating bank and will not apply for a license as participation bank.

CONCLUSION

The present political turmoil set aside, the most interesting news will be generated from the result of the renegotiation of the ongoing stand-by program of the IMF that will soon expire. That program has dominated the Turkish financial policy for long times now and resulted, combined with sound economical reforms, in the exceptional growth and stability in Turkey over these last years.

Among the alternatives for a replacement are post-program monitoring and a precautionary stand-by program that does not include funding. This will most probably result in the continuation of the present policies and will further sustain growth amidst the present turmoil on the global financial markets.

Turkey will be able to obtain the remaining loans from the IMF and if the latest review is approved by the IMF Executive Board, USD 3.6 billion in loans will be released.

The IMF expects Turkey's gross domestic product (GDP) to grow by 4 percent in 2008 and 4.3 percent next year. According to the just released IMF “World Economic Outlook” report, Turkey's rate of inflation based on consumer prices might be estimated to be 7.5 % this year 2008 and 4.5 % in 2009. The expectation on the current account deficit for 2008 is 6.7 % of GDP and 6.3 % for 2009. Though every economy will be affected more or less by the present credit crunch, the Turkish economy – and certainly the Turkish participation banks – appears to be relative safe.

All in all, subject to the further developments in the closure case, this results in stable to slightly positive prospects for Turkey during 2008 and well into 2009.

Paul WOUTERS
consultant to Bener Law Office
Istanbul – Turkey
paul.wouters@bener.com.tr

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Turkven Invests in Tekin Acar Cosmetics

2008-05-27T23:11:00.005+03:00

This will probably not be the last post regarding Turkven Private Equity and its disbursement of its $400+ Million TPEF II Fund. Turkven's latest investment consists of Tekin Acar Cosmetics - the largest selective cosmetics retailer in Turkey with over 40 stores located in 15 cities and a market share of 35%. The Company sells perfumes, skin care, make-up, sun and other products and employs approximately 400 people.

Turkven Managing Director Seymur Tari added: "The Company is well positioned to reach its operational and financial targets with an investment budget of YTL20 million and no financial debt." Turkven Principal Sepin Sinanlioglu Inceer added: "We plan to increase the total number of stores to 100, our market share to 40% and our turnover to YTL150 million."

Commenting on the transaction, Chairman Tekin Acar said: "Our partnership with Turkven will help us better execute our ambitious growth plan in the coming years. Our goal is to increase our market share through geographic expansion and to continue to offer a wide selection of selective cosmetics products to our customers at affordable prices."

Turkven was advised by Baker & McKenzie, Paksoy, Davutoglu (legal), GBC (industry) and PricewaterhouseCoopers (financial & tax). The Sellers were advised by Standard Unlu (financial advisor), Guzeldere and Karaosmanoglu (legal).

It would be interesting to know what is the timeline for this investment with the growth of stores and turnover or what equity stake was taken by Turkven, but unfortunately this information was not given.

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A Challenge To All Hackers: Get the Internet Banned in Turkey!

2008-05-24T22:30:00.008+03:00

For the fourth (possibly 5th, God who knows?) time, YouTube has been blocked/banned in Turkey. When accessing the site, a "blocked" message appears and states that YouTube has violated certain laws both on the 30th of April and May 5th, of which it still has not revoked the "incriminating" videos. In these crazy times - have the majority of us become too complacent, that we don't even question why anymore?

I think it is time to talk about ideas. Not only having innovative ideas, but the freedoms to foster, fester, and then free those ideas across the globe. Lately, these freedoms have been under threat. I'm not talking about the freedom to watch cute kittie videos either.

What is a blog? A blog is a free-form of expression. Our synapses fire, and whatever we think, we write for the whole world to see. It is simplicity, it is human, it is beautiful.

What is Wordpress? It is a community-based blogging platform, that only until recently, after 7 months, has finally been unblocked in Turkey.

What is YouTube? YouTube is a free-form social community that allows all forms of video expression to the rest of the world. YouTube has been blocked 3-4 times in the last year by Turkish courts for defamation according to certain laws.

Other sites that still are blocked consist of the CNN Ticker/blog. Turkey has also blocked the Flickr Blog in the past, but now it is up and running.

It is time to talk of ideas - ideas that transcend any filters, blocks and laws. It is time for common sense to take a stand.

Throwing Down the Gauntlet!

That is why I'm calling on all hackers to fight this. How you may ask? No, we're not going to form a new party, but yes, it is in the same spirit. We're going to shut down the majority of the Internet in Turkey!

First Objective: Facebook!
Hacker_Project_1 - Design an application on the Facebook API that in a sense will get Facebook blocked and banned in Turkey. I'll let you use your imagination on this, but it shouln't be too hard to get thousands of people to join a community application that sends favorite animals to friends with the heads of famous Turkish historical figures (if you get my meaning). Once this is done, we can move this to other social community platforms.

Second Objective: All Blogging Platforms! Hacker_Project_2 - What was already done for Wordpress can be done again. It should be fairly simple to publish a blog post on multiple platforms as well as pages. This will most certainly cause the root domains to get blocked.

Third Objective: Move on to other easily accessed and popular websites. If we have to form a public open source community on this, we should.

I'm not asking you to break the law here such as breaking into secure servers, I'm simply trying to prove a point that by using network and community resources legal in the rest of the world, you can get websites blocked in Turkey.

By bringing the (cursed and wicked) Internet to its knees, the government will be forced to acknowledge these loosely interpreted but strictly enforced laws to control the Internet are infringing on the citizens' rights and freedoms to access information and the freedom of expression. It is too bad that politics has come into this, but for Turkey to progress in education, for children to grow up and be innovative, and for democracy, we must tell our politicians that the laws that our judiciary are interpretating (independently? - I think not) - are essentially putting Turkey in the same category as Iran, China, and North Korea.

Turkey Cannot Control the Internet: Let Rives be the Emperor!

What is TED? TED (Technology, Entertainment, Design) is a conference - an invitation-only event where the world's leading thinkers and doers gather to find inspiration.

Let me introduce Rives - a poet, a spoken-word artist. He wants to be the emperor of the Internet. Let's laugh a little, and forget that others have tried to control an Internet that will never be controlled.

Yours truly will be on vacation for the next two weeks, sorry. But I will try and keep up, the news is starting to flow in.

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Conference Announcement: Venture Capital in Emerging Markets - 9 - 10 June, 2008 - Istanbul, Turkey

2008-05-11T22:15:00.004+03:00

I am very happy and proud to hear that Mae Ozkan and her team at GoldenHorn Ventures have put together a conference: Venture Capital in Emerging Markets (http://emergetechvc.com) to be held on the 9 - 10 June, 2008 in Istanbul, Turkey.

For registration, please visit the:
Venture Capital in Emerging Markets Registration Page

Hosted by GoldenHorn Ventures, I'm very curious to see the spectacular things that will get started as a result of this first conference. This is truly great news for Turkey, the Turkish VC industry, and Turkish entrepreneurship.

From their website:

This, therefore, seems an excellent moment in time to bring together an international group of business and investor practitioners – some “old hands” at business creation and financing, others, enthusiastic to learn and participate, and to develop a clearer understanding of what is going on in emerging markets, what best practices can be adopted and how knowledge and expertise can be transferred with the support of public and private interests, institutions and businesses, to oil the wheels and enable more effective progress for the good of all.

Who Should Attend?

Entrepreneurs with a serious interest in early stage business and entrepreneurial finance in emerging markets

National and International Investors and those advising investors in larger funds on capital allocations

Banking Leaders

Executives of Multinational Corporations with strategic decision responsibility for the development of Emerging Markets

Leaders of Institutions, such as Universities and Business Schools with special interests in business creation, technology transfer and entrepreneurial finance

Those in Government and key regional development agencies concerned with economic development and business and job creation

The Agenda will be as follows:

9 June

9:30 - 10:00 Registration and Coffee
10:00 - 11:00 Welcome and Introductory talk
11:30 - 12:30 The Nature of Financing in Emerging Markets
- What would make a qualified VC from LP point of view?
- Is the model of funding right? ( from an LP point of view) What else is missing? How can it be improved?
- What could be done to create a VC environment in emerging markets?
- What role each party wants to play in the regions?

12:30 - 14:00 Lunch
14:00 - 15:00 Problems of emerging market entrepreneurs
- What are the common mistakes of Venture Capitalists in the Emerging markets?
- Why do they fail?
15:00 - 16:30 Networking time or "chat" groups around specific topics
- Company going global
- Fundraising Tips from LPs, New Model suggestions from Fund Managers
- Managing Portfolio Companies
- How to exchange information for more Success Stories
16:30 - 17:30 View from local VC'S; what is it they are doing right/wrong, strategies, commonalities between emerging market conditions
- What are the Investment Strategies?
- What do we need to make success stories? Is it the fundraising/ dealflow/ managing portfolio companies/ exits the most time consuming? / where you need partners / help?
- What are the wrong models for venture capital in emerging markets?
- What are the right strategies for venture capital in emerging markets, which brought success to your companies?

Free time until dinner for "networking"/marketplace activities

20:00 - 22:00 Dinner and Networking Events

10 June

9:30 - 10:30 The ecology of emerging markets
11:00 -12:00 Angel Networking and cross-border angel activities
Buffet lunch

Please forward this post on to those who you feel may be interested.

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European Founders Fund Invests and Takes Stake in YemekSepeti.com

2008-05-08T22:56:00.010+03:00

YemekSepeti.com, a takeout food ordering service which operates with 2,650 member restaurants, has sold an estimated 20% equity stake for $3 million to the European Founders Fund of Germany, thus valuing the firm at $15 million. The deal was reported in the TDN (Europeans partner with Turkish food portal) and the Milliyet Newspaper (Turkish: Yemek Sepeti’ne Almanlar girdi). In addition, more specifics of the deal were also garnered from Arda Kutsal's Webrazzi (Webrazzi (in Turkish): YemekSepeti.com’un azınlık hissesi European Founders’ın).

The announcement highlights Turkey once again for its growing Internet space and interest by foreign private equity. With sources close to the deal, it appears Yemeksepti.com will use the investment to move its service into Eastern Europe.

According to the Milliyet article, it looks like other investors consisted of Raymond James Türkiye Yatırım Bankacılığı General Manager Gökçe Kabatepe, Mondus.net’s founder, internet investor and GP of iLab Ventures - Cem Sertoğlu, as well as Çağan Şentürk and Başar Başaran, taking on some share of equity.

We first learned of European Founders Fund and their interest in Turkey when they became limited partners of Turkish Venture Capital Fund, LeVenture. Also, we must also remember that EFF had invested in Cember.net just before it was sold to XING.

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CFK Partners Launches with Turkish Focus

2008-04-27T22:08:00.006+03:00

In my correspondance with CFK Partners and the post in regards to their acquiring a stake in Vakif Girisim, I was able to secure some information regarding their plans and focus for Turkey. I do not know how helpful this might be for my readers due to the clarity of the email response, and for that I apologize.

Here's how the emailed questions were answered:

------------------------------------------------------------------- Important Note:

Acquisition of Vakıf Girisim, will be valid following the approval from Capital Markets Board of Turkey (CMB).

Our Investment Strategy, Investment Focus, and Growth Scenarios will be valid in the case of approved acquisition.

How does the acquisition of Vakif Girisim fit into CFK's strategy?

Along with the other products/services, CFK & Partners overrates Venture Capital with corporate social responsibility point of view.

CFK & Partners thinks that most of the innovative ideas come to the scene at the universities and at the Techno Cities organized by TUBİTAK, but financing is very limited to turn these ideas into commercial and industrial investments.

In this concept, our company plans to support innovative ideas –(that have high potential to compete with its rivals/peers with in the country or outside the country ,and suitable for our investment strategy)- to be beneficial for the Turkish economy and to promote young, successful entrepreneurs by providing finance & managerial support.

The reason behind the CFK acquisition of Vakıf Girişim

Vakıf Girişim was founded at 1996, and it was the first Venture Capital Company in Turkey. That’s why CFK has a strong desire to keep the Vakıf Girişim afloat; and also CFK believes that the business is highly compatible with CFK’s targets.

What is your investment focus and strategy?

Investment Focus:

Projected to invest at all the niche areas and sectors, with a focus on: technology, Internet Media, Food, Logistics (focus on warehousing), Health, Energy, etc.

Investment Strategy:

Start-up and Early Stage investments
Pre-IPO investments (invest before 6 months -1.5 year, and exit with IPO)
Co-Investments (invest with more than one international VC companies)
Invest within crosswise sectors
Founded new VC companies , to spread the risk, and to invest together (If technically applicable)

What will be your plan for growth of your portfolio? How many investments are you planning? How will you find dealflow?

To invest in more projects; after achieving acceptable growth rates; we want to invest in min.5-6 projects for an amount of $4-6 million.
Plan to invest with 10% of our portfolio in projects as “angel investor” , to reach our mentioned target we plan to:

Collaborate with universities (esp. engineering faculties),
Hold conferences
Organize contests to promote new ideas
Provide computer software for on-line application documents

Plan to get help form consulting firms, to reach our goal in an effective and efficient way. (Especially we want get help from “Venture Capital Portfolio Management Firms, that has been practical with August -2007 CMB announcement).
Plan to take a share from existence venture capital firms.
To diversify our portfolio, we can invest in the companies that are currently listed at ISE.

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Idea Contests: Beneficial to Students and a Nation? - Or Exploitation of Entrepreneurial Ideas?

2008-04-20T22:24:00.005+03:00

Recently, the Turkish Daily News had a very generous front page article, ("Young Turks' career question: Why?") concerning Unilever's IdeaTrophy Contest. A business strategy contest for university students throughout Turkey, IdeaTrophy provides a competitive platform for students to form teams, culminate ideas, and present to Unilever executives. Winners of the yearly contest are rewarded with small cash prizes (and potential for employment). While I agree that the contest provides a good framework for teamwork, business planning education, presentation skills and valuable experience working with a multinational corporation, I will stop short at saying it promotes and improves innovation and entrepreneurship for Turkey.

This is the problem I have with these "idea" contests. For these large MNC's, they are quite simply building a marketing focus group for free, and a permission-based recruiting network. By asking for ideas (bordering on exploitation of rather entrepreneurial ideas that are not their own), the MLC focuses on the best of the best, refines them, and "rewards" (disguises) it with a contest prize incentive. Whether the student winners are hired is immaterial, the objective of garnering valuable market data on Turkey's youth, the largest demographic in Turkey, has been achieved. I find it interesting that last year's contest was on product development, as they received hundreds of brainstormed ideas for free. Having completed that production of an abundant array of Lipton Tea products (Long Tail?), this years contest decided to focus on customer attraction and retention. Hmm.. how interesting. (Back in the day, people used to actually work for a living)

Cem Tarık Yüksel, Unilever's veteran human resources manager, (interestingly enough) was quoted as saying,

"the first question youth ask themselves is whether they were doing a meaningful job or a “brand-name” job. “In the past, ‘brand-name jobs,' such as being the so-and-so manager of company X, used to be in high demand. But now they look at whether that job has a meaning,” he said. He added that people were not satisfied with “brand-name” jobs that did not provide them with real responsibilities."

The competitors have to pass various elimination processes, just as in pitching an idea to the board of a multi-national company. “The first one is at the idea level. The goal here is to promote innovative thinking. The roughly 50 teams that make it through the first elimination are asked to prepare their business plans,” said Yüksel. The second elimination yields 20 teams and these make a presentation to a board made up of the manager of the related brand and human resources group. Ten teams are chosen as finalists and are then invited to a three-day camp, where they receive training on their subject. The last day of the camp is “the big day,” when teams make a presentation to members of Unilever Turkey's board of directors."

Ironically, later in the article, interviews are made with previous winners of the contest who just so happen to work for Unilever, as they fit so nicely into their "brand name" jobs. Here's what they had to say the contest did for them.

Mehmet Çelikol is a member of the team that won the IdeaTrophy prize in 2005. “I was studying computer engineering in Bosporus University, but I had decided to go into marketing,” said Çelikol, who currently works as a products manager assistant for Dove Hair at Unilever Turkey. “So this was important for me. It was a turning point in my career,” he said.

Mirella Kasuto is another IdeaTrophy winner who has joined the ranks of Unilever Turkey. She was a member of the winning team in 2001, the first year the competition was held. She believes that the competition had positive results and was influential in her decision to apply for a position with Unilever. “The competition taught not only me, but the whole team quite a lot. It allowed us to have a real business life experience as students. It was also an opportunity for us to get to know Unilever better,” she wrote in an e-mail interview from a business trip abroad as customer marketing manager in charge of the Lipton and Amaze brands at Unilever.

How many entrepreneurs wake up one day and say, "I want to be the product manager for Dove Shampoo!" Do I dare say this is the reply to your primary school teacher's question, "What do you want to be when you grow up?" I think not.

So who are the real winners here? Does Turkey, as a nation, increase its wealth? Have we increased the entrepreneurial spirit and spurred innovation? Some may argue that the valuable job experience, which so few young educated Turks have, is of the upmost value. Others might argue that young Turks are able to sample new products first-hand. And this is an incentive to compete?

OK, OK, I'll get off the rant. But regardless, if you are a student with minimum ideals, prospects, dreams and/or ability to take risks, than these contests are an excellent opportunity to flaunt what you think you got. Take the 50 year job, get the gold watch and parachute. For other contests, you should also check out TRUST International Management Game by Danone, or Loreal's E-Strat Challenge just to name a few. Don't get me wrong, these contests are a great experience for students, but the hidden benefits for the company are greater.

That said, how many university students do you know that opted for an internship vs. a summer in Bodrum? The point is that it takes all kinds. Everyone is different. However, if you think you are an entrepreneur and your ideas will set you above the rest, then don't waste your time. Wait for the next business plan contest, and pitch your idea to real VCs. You may die broke, but atleast you weren't a numbered cog.

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Turkey's First Hedge Funds; Trouble for Turkcell; Carlyle Group's Summer Intentions; and Turkiye Finans and NCB

2008-04-06T22:29:00.012+03:00

İş Bank's investment division, İş Invest (İş Yatırım Menkul Değerler), has been approved by the Capital Markets Board to operate a hedge fund. It will have an initial YTL 30 million ($23 million) under management.

The İş Invest's announcement comes one day after Garanti Bank, the Turkish lender co-owned by General Electric Co., said it received approval to open Turkey's first hedge fund. The fund initially will have about YTL 500 million ($388million) under management.

TDN: Banks race to open first hedge fund in Turkey

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It seems Russia's Alfa Group, just after acquiring AFM cinemas, may be about to gain control of Turkey's largest mobile phone network, Turkcell. The deal is hinging on a court case between Turkcell stockholders, Alfa Group and Çukurova Holding.

TDN: Russia's Alfa dreams of Turkcell ownership

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Carlyle Group's Can Deldag made an announcement stating to be on the lookout for deals coming this summer, possibly in June. The news is fairly weak, but you can judge for yourself.

TDN: Carlyle Group plans acquisitions in Turkey

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I reported on the Turkiye Finans deal with NCB last year, and it appears the due diligence has come full circle and finally been completed. The announcement was made last week.

TDN: Saudi Arabia's NCB buys Türkiye Finans

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CFK Partners Joint Venture With Multinet Buys Stake in Vakif Girişim

2008-03-30T23:00:00.006+03:00

Beating out heavy contenders like Global Yatırım Holding to buy a stake in VakifBank's Venture Capital Unit, Vakıf Girişim Sermayesi Yatırım Ortaklığı A.Ş., CFK & Partners in a joint venture with Multinet Kurumsal Hizmetler A.Ş, has bid to pay 3.13 milyon YTL for 31.15 percent.

According to the report by the TDN, Global made an offer to buy 31 percent of Vakıf Girişim. Although the details are few, shares jumped for Vakıf Girişim on the Istanbul Stock Exchange following the announcement, valuing the trust at YTL 7.9 million ($6.6 million).

This block sale of Vakıf Girişim had been announced previously. VakıfBank decided to sell its stake in Vakıf Venture Capital Investment Trust via block sale to domestic or foreign-based investors. Vakif Girişim's deals have been fairly unpublicized, and as of late, it was thought that they were no longer pursuing deals. But as it turns out, the controlling shareholders of Vakıf Girişim did not want to conduct venture activities and considered a sell-out, merger with another company or conversion into a real estate investment trust. However, it is interesting to note Global's interest for "skin in the game".

Amazingly, CFK & Partners announced (in Turkish) that they will be taking a 31.15 percent stake for YTL 3.13M ($2.6 million). This should value the trust at around YTL 10 million ($8.4 million).

I managed to speak with someone at CFK privy to the deal.
The results of the deal are as follows:

CFK Corporate Finance Consultancy Joint Venture Group (Multinet Kurumsal Hizmetler A.Ş.(Multinet) & CFK Kurumsal Finansman Danışmanlık A.Ş. (CFK & Partners)) placed the best bid with bid with TRY 3.1mn (EUR 1.7mn), for the sale of Vakifbank’s 31.5% stake in Vakif Venture Capital :

Total 31.00 % stake for Multinet

%25 Group A
%6.00 Group B

Total 0.15 % Stake for CFK Corporate Finance Consultancy Inc.

% 0.05 Group B Stakes of “Vakıf Finansal Kiralama A.S.”
% 0.05 Group B Stakes of “Vakif Deniz Finansal Kiralama A.S.”
% 0.05 Group B Stakes of “Gunes Sigorta A.S.”

CFK Corporate Finance Consultancy Joint Venture Group applied to the Capital Markets Board of Turkey (CMB) for the share transfer approval on March 7, 2008. The sale will be valid following the approval. The Company will also make a tender offer for minority shares.

Although some may consider this "small potatoes", they are very interesting developments, indeed. Could this even set a precedent for successful Turkish secondaries? CFK Halka Arz is a relatively new player in the Turkish Venture space, and up until now, they seemed still in the early stages of development (including their website). It should be interesting to see where this takes them.

UPDATE: I have just received prudent information regarding CFK itself, and I will include it in the next post. Please subscribe if you would like to receive it.

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Fideltus Capital Signs Agreement with German-based IEG

2008-03-24T11:19:00.005+02:00

Fideltus Capital, a leading independent corporate finance advisory company in Turkey, and Berlin-based IEG Investment Banking have signed an agreement between the two companies to focus on Corporate Finance Advisory, Institutional Placements and Principal Investments.

IEG is one of Europe's leading independent investment banking houses for mid-cap companies, entrepreneurs and institutional investors.

It looks as if the deal is of significant strategic importance for both companies, aiding Fideltus to better brand recognition, funding relations, and investments abroad, while IEG will "centralize" in Turkey, making investments and using it as a springboard for further investments in the Middle East and North Africa.

"We will target the mid-cap client group, which has a business potential of between $5 and $250 million in corporate finance advisory," said Stefan C. Heilmann, IEG managing director. "Turkey has strong economic fundamentals, which is a key point for our clients."

The deal is also very interesting because again it points out not only the gap of private equity players in the Turkish market, but also it may prove that other Turkish financial advisories in Turkey may be up for grabs for further partnerships. The amount and type of investment deals that have been done in the last year alone have peaked quite an interest in Turkey, and the investment range signaled by this agreement has great potential, given the number of Turkish SMEs.

More details regarding the deal (in Turkish) from Referans Gazetesi: "Fideltus ile IEG güç birleştirdi, hedef küçük Goldman olmak"

In English from the TDN: "External causes behind recent turmoil"

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