KPMG's Perspective: Mergers and Acquisitions Trends 2020 Report Released

KPMG Türkiye has unveiled its 'KPMG Perspective on Mergers and Acquisitions Trends 2020 Report'. The report evaluates mergers and acquisitions transactions globally and in Turkey, presenting how the challenging year of 2020 reflected on economies from a different perspective. According to 2020 data, mergers and acquisitions transactions worldwide showed performance close to but below the previous year. In Turkey, both transaction volume and transaction count increased. The total value of disclosed transactions reached USD 6.9 billion. The estimated total transaction volume including undisclosed transactions reached USD 9 billion. This figure was USD 4.5 billion in the previous year. In 2021, gradual economic improvement is expected to drive increased transaction volumes KPMG Türkiye Consulting Division has unveiled the 'KPMG Perspective on Mergers and Acquisitions Trends 2020 Report', which it prepared for the second time this year. According to the report, transaction volume and transaction count in Turkey increased compared to the previous year. Optimistic expectations are maintained for 2021, with the forecast that transaction volumes will increase with gradual economic improvement.

A year of uncertainty

Beyond the pandemic that marked the entire year, US presidential elections, protests and demonstrations in various countries worldwide including the US and Hong Kong, conflicts in Western Asia, and Brexit-related uncertainties affected the economy and politics. According to the report, global mergers and acquisitions activity in 2020 showed performance close to but below the previous year, while Turkey recorded significant increases in transaction volume due to transactions at the billion-dollar level and above. Transaction count also increased compared to 2019. In 2020, the disclosed transaction volume reached a total of USD 6.9 billion.  

Technology, media and telecommunications sector leading

In 2020, parallel to global trends, the TMT sector stood out in both transaction count and volume as digitalization increased. The largest transaction in the technology, media and telecommunications sector was the acquisition by Türkiye Varlık Fonu of 26.2 percent of Turkcell shares for USD 1.8 billion.  

USD 3.6 billion transaction volume

Financial investors (private equity, venture capital, sovereign wealth funds, etc.) carried out 78 transactions in 2019, with their transaction volume accounting for 3 percent of total transaction volume. By contrast, in 2020, financial investors that conducted a total of 129 transactions saw their transaction volume represent 52 percent of total transaction volume, unlike the previous year. The acquisition of Turkcell by TVF and LetterOne in June 2020 and Qatar Investment Authority's acquisition of a minority stake in Borsa İstanbul were among the significant financial investor transactions in 2020. Similarly, Actera's investment in Vivense in July 2020 and Doğan Holding's venture capital arm Öncü Girişim's acquisition of 70 percent of Sesa Ambalaj stood out among financial investor transactions.  

Domestic investors' transaction volume surpasses foreign investors

The number of mergers and acquisitions transactions carried out by foreign investors, similar to past years, was 83 transactions in 2020, representing 32 percent of total transaction count. However, in 2020, foreign investors' transaction volume compared to the previous year was USD 3.1 billion with an increase, yet their share of total transaction volume at 45 percent remained below that of domestic investors. Additionally, the fact that 6 of the top 10 largest transactions in 2020 were carried out by foreign investors was another notable point.  

Objective: creating value in the public sector

Activity in public sector-sourced transactions through privatization processes and TMSF transactions continued from 2018 and earlier. From 2019 onwards, with the New Economic Program and TVF's active role in economic transformation based on production, exports and financial stability, value creation in the public sector was targeted. The previous year, TVF materialized this role through significant transactions, and in 2020 continued to create value in the public sector through strategic and large-scale investments and acquisitions. As part of the objective to support Turkey's competitive companies, TVF's acquisition of 26.2 percent of Turkcell shares, positioning the company as the largest shareholder with management control, and the consolidation of public insurance companies under the TVF - Türkiye Sigorta umbrella as part of expanding the savings base of the national economy and developing the non-banking financial sector, were among the notable public sector-sourced transactions of the year. The transfer of operating rights for the Çukurova Airport Project won by Favori İşletmecilik - Yako Tekstil Joint Venture and the acquisition by Qatar Investment Authority of TVF's minority stake in Borsa İstanbul also stood out as notable public sector-sourced transactions.

Expectations for 2021 are optimistic

Müşfik Cantekinler, Head of KPMG Türkiye Consulting Services Division, said that optimistic expectations regarding mergers and acquisitions transactions in 2021 are being maintained. Noting that KPMG Türkiye, selected as the advisory firm of the year by Mergermarket, one of the most influential and respected organizations tracking international mergers and acquisitions activity, has been involved in advisory processes for significant transactions, Cantekinler highlighted the following points:  

• We see that following vaccination efforts, the impact of the pandemic will gradually diminish, and thanks to unprecedented economic support and stimulus packages announced by governments to mitigate the economic effects of the pandemic, central banks' expansionary policies and high levels of liquidity in money markets, companies are reassessing their supply chains on a global basis. In this context, we expect Turkey to come to the forefront, particularly in the industrial production sector, and the stabilization process in economic indicators within the framework of predictable monetary and exchange rate policies to achieve growth, employment and price stability targets could be factors that increase investor appetite. On the other hand, the continuation of pandemic effects on the economy, extended recovery period, possible US and EU sanctions, political uncertainty and security issues that could occur in Turkey's near geography stand out as downside risks.

 

• According to the report prepared by KPMG Türkiye, in 2021 the industrial production and automotive, technology, media and telecommunications, pharmaceutical and healthcare sectors are expected to stand out.

 

• Among the factors that could increase transaction volume are investments by TVF in petrochemicals, mining and energy production projects from domestic resources, the re-tendering process for companies transferred to TMSF, and the entry into the tendering process for assets in the portfolio of ÖİB.

 

• With the acceleration of global vaccination efforts and the pandemic entering a resolution process, we maintain our optimistic expectations for 2021 and forecast that transaction count and volume will increase with gradual improvement.