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CEELM10 Interview: A Decade of M&A in Turkiye

CEELM10 Interview: A Decade of M&A in Turkiye

Issue 10.11
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KP Law Managing Partner Onur Kucuk talks about the evolution of the sector and their role as legal advisors in Turkiye over the last 10 years.

CEELM: Over the last 10 years, what types of projects have been keeping your M&A team busy?

Kucuk: Reflecting on the Turkish economy’s evolution over the past 10 years, the types of projects we encountered a decade ago were varied and numerous, attracting foreign investors from all countries. These projects ranged from exclusive Turkish deals to global ventures, without any distinct segmentation in the M&A sphere. Turkiye’s resilience during the 2008 financial crisis played a significant role in attracting investments – with a growing economy, high public and private spending, and strong government confidence, our country was an attractive investment destination. However, global changes have since directed investor focus toward market-infused targets, both locally and globally. The current trend leans toward strategic investors rather than private equity and venture capital ones, influenced by rising interest rates and the costlier global financial landscape. This shift is also reflective of the Turkish economy’s characteristics. Notably, foreign direct investments have somewhat diminished, and there’s a growing inclination toward technology and fintech projects. The emergence of unicorns in these sectors is a testament to the prowess of Turkish players in these markets – they’ve been doing a great job, overall.

CEELM: Looking back at the last 10 years, what were the highlights in terms of your team’s workload, and what do you believe led to them?

Kucuk: In the period between 2013 and 2016, we saw a surge in M&A deals and foreign investments. However, post-2018, there was a slowdown, influenced by changes in Turkish economic policies and a decline in foreign direct investment to approximately 10-20% of what it was a decade ago. The global economy, particularly the pandemic, also reshaped business practices. Government subsidies aimed at economic survival have now resulted in high inflation rates. To combat this, central banks adopted tighter monetary policies, reducing investment activities and affecting M&A deals. Turkiye’s experimentation with unorthodox economic policies, especially in managing inflation, didn’t yield the expected results. As of mid-2023, policy changes are underway, and we anticipate a revival in M&A activities and foreign investments. Throughout these fluctuations, industrial manufacturing M&A deals remained constant. Turkiye’s robust manufacturing and industrial facilities continue to attract strategic investors. The shift from predominantly EU and US investors to those from the UAE and former Soviet countries is also notable.

CEELM: What led to this change in investor dynamic? What is driving UAE investors to the market?

Kucuk: I think they see our country as a hub that enables entry into new markets, alongside the attractiveness of expanding operations to Turkiye. We have, in a way, always been an EU-adjacent lion of sorts. For example, we have a strong textile industry and are a strong agricultural player – these sectors are most attractive and could be considered a sort of honey pot.

On the other hand, Western investors’ decline in numbers is most likely more related to the internal economic policy shifts in their countries of origin than it has to do with Turkiye as such.

CEELM: What changes have you observed in client expectations and needs?

Kucuk: Two significant shifts are evident: the increasing importance of ESG issues and the growing prominence of technology. There’s heightened client interest in understanding the environmental impacts and compliance aspects of potential investments. Additionally, as technology becomes more integral to our lives, clients, especially in tech and fintech, expect legal advisors to have a grasp of both the legal and commercial aspects of their industries. Our clients wish to see us have the capacity to analyze and comment not just on the legal aspects of a deal but also on the commercial aspects of the industry as a whole. The focus of lawyers can no longer solely be local – it needs to incorporate other legislation on a specific matter, meaning that we need to develop a commercial sense to be able to at least comment on and compare foreign laws with local ones. This is most evident, for example, when it comes to understanding data privacy laws across different jurisdictions, necessitating a broader and more commercial approach to legal practice.

CEELM: From a legislative/regulatory perspective, what have been the main recurring challenges you have faced in making deals happen?

Kucuk: Regulatory challenges have not deterred deal-making. Our role involves structuring deals to comply with regulations without breaching laws, of course; yet despite various regulatory changes in Turkiye over the past decade, none have significantly deterred investors. Queries about capital movement regulations have increased, but they haven’t impeded investments.

CEELM: What lies on the horizon, and what do you believe will be the highlights in a similar interview a decade from now?

Kucuk: I predict a transformative shift in business practices, akin to an industrial revolution, over the next decade. This change will demand creativity for survival.  In addition to technology’s continued influence, I think Turkiye will regain its position as a significant destination for foreign direct investment – much like it was a decade ago. Additionally, I am hopeful for the resolution of current geopolitical conflicts.

KP Law is CEE Legal Matters' Practice Leader for Corporate/M&A in Turkiye for 2024 – learn more here.

This article was originally published in Issue 10.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

KP Law at a Glance

Based in Istanbul, Turkey, KP Law is an independent full-service law firm providing multidisciplinary solutions to the clients worldwide. With over 55 lawyers and specialists, KP Law makes the best of agile & holistic approach as a strategic partner to your business with well analyzed reality checks, risk monitoring and pragmatic solutions. The firm has a distinguished status with built trust, a consistent high quality and stands out as a preferred vendor of Big4 as well as large size consultancy firms. Thanks to this accumulated knowledge and track record international experience, the team is intensely committed to high quality strategic approach and value-based delivery with commercial awareness and deep understanding of industry dynamics.

KP Law is led by Founding Partner Att. Onur Kucuk, a skilled negotiator, trusted by top executives, multinational clients to advise on critical projects and large-scale, cross-border transactions with 25+ years of experience in corporate and M&A. He leverages his professional and communication skills to be an inspiring leader for each and every one of his teams. He is a prominent speaker, author, and lecturer with contributions to industry publications and mainstream press, in cooperation with various organizations including Harvard Business Review Türkiye, Bahçeşehir University, and Board Membership Mentoring and Development Program and member of International Bar Association (IBA).

Our Services: KP Law has a leading practice focused on Mergers and Acquisitions, Corporate, Commercial Law, Intellectual Property, Employment and Contracts, Data Protection & Technology, Tax Law, Capital Markets, Arbitration as well as Litigation and Arbitration across a wide range of industries with particular emphasis on the retail, industrial manufacturing, fintech, e-commerce, and energy sectors.

Our Approach: Adopting innovative approaches by combining high-quality strategic thinking, commercial awareness and cutting-edge technology, our team acts with an unconventional mindset and approach:
- Going beyond just giving legal advice, we put ourselves at the heart of your business. By understanding your problems and needs, we redefine them.
- We give you a competitive advantage by predicting problems before they arise.
- We take an analytical approach by breaking the most complex problems into simple formulations to offer a clear path forward.
- We add value to your business as we invest in a team of legal talent combined with strong financial literacy and strategic thinking.

Firm’s website: www.kplawtr.com