“The ones who underestimate experience, pay a high price for inexperience.”
April 2020

Private Capital Transactions in Turkey and Environs Going Forward | 16.04.2020

Online Brainstorming Sessions – 1


Participants; Jorrit Dingemans - Manager Private Equity, FMOBarış Gen - Principal Investment Officer, IFCKarsten Sinner – Associate Director Equity Funds, EBRD and Çağatay Özdoğru - CEO, Esas Holding and Barış Öney - Founder and Managing Director, Globalturk Capital and EMPEA Turkey Representative.

Highlights of the Session

Current Status

DFIs have all taken measures to cope with the acute crisis. They have first opened up their first tranche of relief packages and now in the process of structuring their follow-on supports. 

Relief Packages
EBRD’s first €1 billion solidarity package is intended for existing clients with immediate working capital and liquidity requirements (see https://www.ebrd.com/what-we-do/coronavirus-solidarity). There is a second package under preparation.  EBRD's emergency solidarity package will operate for as long as it is needed.  At the same time, EBRD is providing record levels of support for trade.  On the private equity side, EBRD is in close contact with its fund managers in respect of their needs.  

The World Bank approved a $14 billion “crisis response facility” where $6 billion is going to be channelled through the World Bank, mainly to the government's or government related initiatives. And then $8 billion is going to be channelled through IFC. IFC then plans to provide $6 billion to banks as liquidity measures or loans to SMEs and $2 billion to the real sector direct clients of IFC to support companies for their working capital needs. IFC also is under discussion to generate additional facilities for their funds to channel through to their investee companies where immediate liquidity is needed. 

Status of Portfolios
On the portfolio side, the GPs where DFIs have invested and monitoring very closely, have been doing very well in their assessments and analysis of their relevant portfolio companies and the immediate impact of the crises. 

DFIs are aggregating this information from their GPs to identify, where the immediate needs are at the moment.  Regions with low leverage at the portfolio company levels benefit in the current situation.  Clearly there are exceptions in certain sectors, where there are immediate funding needs, but all in all there is a relatively good short-term liquidity situation. How long this will last, depends on the duration of the crisis. Three months is probably a timeframe, where the majority of the portfolio companies can sustain, with exception of certain sectors that have been hit hard. 
FMO has exposure to 84 countries, and obviously receiving all sorts of responses at the moment. Retail chains and financial institutions were adversely affected. The rescue liquidity currently is mostly needed in India, where other parts of the FMO portfolio, have not yet requested any emergency support. Nevertheless, there are on-going discussions on setting up liquidity funding vehicles through some GPs. 

Forecasting FMO’s fund portfolio needs, is extremely difficult in terms of exact impacts since the portfolios are very diversified. They have investments in casual dining in Southeast Asia to manufacturing in China, yet alone other markets totalling 185 funds. Eastern Europe seems to be doing well and no immediate requests for liquidity coming out of Ukraine, Georgia, and Turkey. 

In Turkey, institutions seem to be already prepared and more used to a strictly less access to capital environment in the first place. That could be evaluated as a positive. Some companies in the courier services for e-commerce in Turkey are doing really well for instance.

For Esas, liquidity has always been the number one focus when managing their portfolios. One of their portfolio companies is Pegasus Airlines, which obviously will be adversely affected. However, due to Esas’ liquidity focus on all of their operations, the company has sufficient cash to carry itself forward for many more months to come. Similarly, their real estate portfolio is self-sufficient. Also, the Turkish Government has taken positive measures on supporting companies and employees during these rough times. As managers, who have seen numerous crisis in the past, be it the 94 crisis, 2001, 2008, 2015 crisis and many others, this one also is another very serious one. However, crisis also means opportunity. Good companies recover much faster and also take a lead position in the marketplace. Esas is looking beyond the crisis and getting prepared for the post-crisis. 

According to Esas Turkey is going to have a big advantage on post-corona period due to being a strong production base and having excellent logistics infrastructure. She will benefit from the supply chain diversification on a global scale. 

Investments and Fund Raisings

At the moment, the general observation is that deals, which have progressed to a certain stage, be it fund raising or investments and exits, are continuing to be executed. In some cases, there are signs that the GPs are actually accelerating the deals like in the case of infrastructure, since parties now have more time to dedicate to closing transactions. IFC has recently closed an investment in North Africa and there are few other funds at advance stages which are progressing. But there are obvious challenges by nature, since everybody is working from home and not being able to travel.


In terms of valuation of portfolios, if the stock markets are taken as a reference, performances could go down by 20-25% in hard currency. And obviously this is a lot of money. Hopefully this will be a short dip and markets will recover quickly as they tend to do after crisis. However, this time it will be a bit rough. 

Duration of the Crisis

The question really is on how long this locked down situation and acute crisis mode is going to last. Economies remaining in permanent shutdown would be pretty devastating. 

Personal opinions range from “the worst in Europe was over but many of the emerging markets like India and Nigeria as heavily populated countries have yet to observe the real impact”, to “it will last quite long for all geographies”. 

At the moment, there are predictions in the Media from various authorities and private institutions about high temperatures in summer to slow-down the virus spreading. In case this may not be true, the virus spreading could explode in places like Africa and South Asia yet alone on other geographies. Since countries are not facing virus spreading at the same time and getting affected the same way, how to return to normality in a global sense is very difficult to predict. 

What to Expect Post-Crisis

It is quite a challenging environment since the world is facing such an incident, which is affecting every country causing simultaneous lock downs almost at the same time. There is a lot of effort on how to move out of this crisis and when. 

Cross-border Element

It is not clear on whether the antibodies in people who have recovered are really providing immunity or not, and how long such immunity lasts. Restrictions and lock downs may be relaxed in several countries, but for cross-border travels to be allowed, it will take much longer which will have an adverse effect on cross-border transactions. How this will affect the global trade relations is very difficult to predict. 

Esas, who owns an airline carrier, predicts that domestic flights in Turkey could start in June but not to all cities. It probably will be gradual. There will possibly be new regulations on passenger seating and many precautions for the airline industry but this may also bring additional costs, which may cause the ticket prices to increase for all carriers. For international flights, more regulations and protocols may be imposed and not all travellers may be allowed to board the planes initially. There will certainly be many abnormalities, which may become the new normal on travel and it may well take longer to start and more time to adjust.

The European Union 

Interesting debates are happening at the EU level as well and there are certainly many challenges ahead. But on the positive side, there was a support package which has now been prepared and agreed upon at the EU level which brought some relief to the states. Such moves could help the EU come out of this crisis better and faster. Also intensifying its relationships and cooperation with its immediate surroundings like Turkey, Northern Africa and Ukraine for example would help flourish trade and wealth and the whole geography could benefit from.

Trade Flows

There is a general consensus that trade flows will change post-crisis but Turkey won’t be alone to benefit from. There will be competition. Turkey is clearly well positioned for the role that was outlined earlier, but countries like Morocco, Egypt and others, are also pitching for essentially a similar role being the manufacturing base for Europe. 

In terms of financial investments, DFIs may phase out of China and move into other Southeast Asian states who are more in need of capital. China, among other reasons, has formed even its own DFI, namely the Asian Infrastructure Investment Bank and has moved into more value-added rather than basic manufacturing. So there have already been  shifts of investments seen gradually switching more to Southeast Asia to countries like Myanmar, Laos and Cambodia where development funding is more needed and this may continue.

Trends in “nearshoring” may be more prevalent but the supply chains of manufacturers like auto, fashion and other companies need to be studied well to understand the full implications. It will be interesting to watch the developments on that end and observe how countries like Turkey, Morocco, Egypt and others can potentially benefit from. There certainly are opportunities on that front. 


The general consensus is that existing transactions are expected to be executed, since parties have already met and due diligence has been conducted. However, for new transactions, since there is a lot of value in meeting people person to person and interacting with them in their own environment, it will be difficult.  Majority of the process may be handled remotely by utilizing technology, but still person to person interactions would be key to close transactions. However, this may change in time as younger professionals may feel equally comfortable meeting people online in the first place.

Globalturk Capital believes companies need to digitalize themselves and make their companies well prepared for investors to be able to interact with them and access information transparently through digital means. We may see online transactions, since it could take more time post-crisis to going back to pre-corona environment. On the other hand, investors who have local teams will actually have an advantage over the ones who don't have local teams, or they may have to partner with companies like Globalturk Capital as their trustworthy venture partner on the ground. 


The overall situation is obviously not so clear and still a lot of firefighting is on-going. IMF and other institutions’ predictions are varying from 5% to 10% contractions for US and Western economies and much more for emerging markets. Therefore, new equity transactions will most likely be prolonged or at least extremely selective and slow and certainly not proactive until the dust settles.

On another note, there is also plenty of dry powder in the hands of private capital and it is a known fact that post-crisis situations pose opportunities. This has proven well post-2008 crisis which emerged out of the US and became a global phenomenon. Investors made substantial returns in their post-crisis vintages. Turkey, having gone through countless crisis in her history, is better equipped to thrive out of this situation once again with its liquidity conscious, most flexible and entrepreneurial spirited business community. 
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