KPMG Zoom: Mergers and Acquisitions Trends – 2021

KPMG Turkey M&A Advisory announces, “KPMG Zoom: M&A Trends” Report for the third time this year. According to the report, mergers and acquisitions transactions in the world had its best year in the last two decades and reached a historical record level. In Turkey, both the transaction volume and the number of transactions increased from the previous year’s levels. The total volume of the transactions reached to $14.3 billion, with disclosed transactions. We estimate that the total transaction volume with the inclusion of undisclosed transactions reached to $15.8 billion. 

As it was the case in 2020, the pandemic continued to have an impact on social, economic and commercial life on a global and national scale in 2021 as well. Although the acceleration of global vaccination efforts supports the normalization process, the potential risks posed by new variants have continued to form the main agenda of the world in 2021. In addition to the pandemic agenda, political developments in the West Asian region, disasters caused by climate change around the world, elections in different parts of the world, anti-vaccination protests were the other prominent economic and political issues in 2021.

As pointed out in our report, the global mergers and acquisitions activity in 2021 was at an all-time high level. A similar rise in the transaction volume and the number of transactions were observed in Turkey. The global mergers and acquisitions volume reached to $5.1 trillion in 2021, which is the highest amount in the last 20 years. Liquidity abundance and investment appetite of financial investors, sectoral consolidation and restructuring in supply chains were the main reasons behind the record-breaking transaction volume in the world. In Turkey, the transaction volume comprising of transactions with disclosed values reached to a total of 14.3 billion dollars, the highest level in the last seven years.

In 2021, the technology, media and telecommunication was the leading sector in terms of the number of transactions mainly due to the increasing importance of different areas of technology in parallel with global trends, as well as digitalization and reshaping in supply chains. Furthermore, transportation was the leading sector in terms of transaction volume. The biggest transaction in the transportation sector was the 25-year tender for the operating rights of Antalya Airport, with a transaction value of $8,211.4 million won by the joint venture formed by TAV Airports and Fraport. The biggest transaction in the technology, media and telecommunications sector was the acquisition of 8.7% shares of Trendyol by a foreign investor group for $1,435.0 million. These two transactions also were the only two mega transactions in 2021, exceeding billion dollars. In addition, Getir received multiple investments that results in a total of $983 million from various foreign and domestic investors.

a. $3.0 billion transaction volume from financial investors

Financial investors (private equity, venture capital, wealth funds, etc.) performed 129 transactions in 2020 and their share in the total transaction was around 52%. In 2021, financial investors carried out a total of 163 transactions, meanwhile their share dropped to 21%.

Turkven's sale of 100% of Elif Plastik's shares to Finnish-based strategic investor Huhtamaki for $483 million was one of the most important financial investor exit transactions in 2021. Another prominent financial investor transaction was the acquisition of 8.7% of Trendyol shares by a group of financial investors for $1.4 billion. Within the scope of the transaction, Japan-based SoftBank Investment Advisers, UAE-based ADQ and US-based Princeville Capital made one of their most important investments in Turkey.

b. Domestic investors ahead of foreign investors

Foreign investors were involved in a total of 66 transactions in 2021. The number of transactions carried out by foreign investors remained below the previous years’ level and constituted for 20% of the total number of transactions. Moreover, although the foreign investors’ transaction volume increased and reached to $4 billion, their share in the total transaction volume remained behind domestic investors at 28%. Six of the top 10 transactions in 2021 were carried out by foreign investors.

In 2020, the dynamism was evident in strategic and large-scale investments and public-sourced transactions, in which Turkey Wealth Fund (“TWF”) played an active role. In 2021, value creation in the public sector continued with the transactions originating from the State Airports Authority (“DHMİ”) and the Privatization Administration (“ÖİB”).

The headlining transaction among the publicly funded transactions was the tender for the 25-year operation rights of Antalya Airport. A joint venture established by TAV Airports and Fraport won the tender with a transaction value of $8,211.4 million. Another significant transaction, which was organized by the PA, was the transfer of 40-year operating rights of Fenerbahçe-Kalamış Yacht Harbor from Turkish Maritime Administration (“TDI”) to Koç Holding with a transaction value of $285.6 million. In addition, CEY Group won the tender for the transfer of 40-year operating rights of Taşucu Port from the PA for a transaction value of $79.2 million. 

Müşfik Cantekinler, Head of Deal Advisory at KPMG Turkey; As we constitute our anticipation for 2022, the impact of the pandemic is expected to decrease gradually as a result of the vaccination campaign, the unprecedented economic support and incentives provided by governments, the expansionary monetary policies of central banks and the provision of high liquidity packages, together with the highlighting of Turkey's capacity in the industrial sector leading to growth, employment and price stability to achieve monetary goals and exchange rate policy improvement, can be seen as the factors that stand out and could boost investor appetite throughout the stabilization process. On the other hand, prolonged effects of the COVID-19 pandemic, a prolonged recovery period, possible US and EU sanctions on Turkey, political uncertainty and security problems in the close geography of Turkey can be considered as downside risks.

According to our report, technology, media and telecommunications, industrial manufacturing, transportation, life sciences sectors are expected to be among the top sectors in terms of mergers and acquisitions in 2022.

In addition to these, the implementation of strategic investments targeted by the TWF, the tender processes of companies transferred to the Savings Deposit Insurance Fund ("TMSF") and initiation of tender processes for the assets included in the PA’s portfolio are among the factors that may increase the transaction volume.

As we stated in our report, “Although investor appetite and risk perception are decisive factors for M&A activity, foreign investors’ rationale has been redirected into certain strategic sectors in Turkey. However, the fact that the companies that will begin evaluating their strategic M&A options after the pandemic will also be involved in the M&A process are among the factors that can increase the volume of transactions. Accordingly, we expect the upward trend in mergers and acquisitions globally in 2021 to show its effect in Turkey in 2022 and increase the transaction volume. "