In recent years, Turkey has emerged as a profitable investment location and is standing out as a country with a robust growth story that is propelling a vibrant M&A market. The number of FDI projects in Turkey have more than doubled from 40 in 2007 to 95 in 2012, according to EY’s Turkey Attractiveness Survey.
Additionally, 2012 was a very active year for M&A. EY figures reveal there were 315 transactions in Turkey, with a combined disclosed deal value of US$23b. Factoring in undisclosed deals, EY estimates around US$30b of M&A activity, which is a post-financial crisis-era record.
Turkey’s strategic location at the crossroads of Europe, Asia and the Middle East, solid economic growth and large domestic market has made a compelling case for investment.
These strengths are attracting a number of investors, who remain confident about Turkey’s future. Indeed, over 70% of the respondents to EY’s 2013 Turkey Attractiveness Survey felt that the country’s attractiveness for investment had either improved or significantly improved.
Despite recent political uncertainty and a slowdown in growth (it is expected to be 3.9% at the end of 2013 according to the October 2013 edition of EY’s Rapid Growth Markets Forecast), the numbers are still robust and corporate confidence is on the up. Historically, Turkey has been reliant on the developed economies for a significant portion of its trade and investment. However, Turkey is now looking to do more business with other parts of the world, including the Middle East, Africa and Asia. This shift in focus and capital flow will accelerate the investment and growth of Turkey.
There’s also continuing interest among FS players not yet actively investing in Turkey to connect with Turkish banks, allowing both sides to access new clients and new markets. This presents an opportunity for banks to grow in the Turkish market, as well as, create synergies with other groups.
However, Turkey’s investment profile goes far beyond FS. Impressive growth in domestic consumption is a pull for large retailers. Over 200 shopping malls have been built in Turkey in the last decade alone and structural changes have added to the attractiveness of the retail sector. Numerous corporates have taken a keen interest in how the Turkish economy and business environment are developing.
On top of these positive factors, Turkey’s large and cost-competitive labour force is making it appealing as a manufacturing destination. According to EY’s 2013 Turkey Attractiveness Survey, the manufacturing sector accounted for over a third (34.4%) of the total projects with FDI between 2007 and 2012 – second only to sales and marketing. So it seems the world has realised that the concept of emerging markets is not limited to the four large BRIC economies – Brazil, Russia, India and China. Turkey has all the fundamental economic characteristics to lead the next wave of rapid-growth markets.
As multinational and SMEs step up their commitment to adapt new business models in these markets, countries will become more competitive and garner foreign investment. This calls for consideration of both risks and opportunities for business leaders. They must take a deeper view of the forces at play in various markets and choose the best location for investment. Turkey’s strong economic fundamentals offer investors a strong risk-reward ratio. However, dynamics differ with the size and type of investment so it is important for companies to carefully assess risk factors before establishing a presence in any country.
EY is dedicated to helping its clients identify and capitalise on business opportunities, and exploring how best to exploit these opportunities into new markets. Contact us for further insights, join the debate at www.ey.com/growingbeyond or contact John Houlden on 0121 535 2309.