Law No. 4054 on the Protection of Competition (“Competition Law”) applies to merger and acquisition transactions ("Transactions") since they may lead to consequences such as establishing/strengthening a dominant position or restricting effective competition in the market. Additionally, as per Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board ("Communiqué"), some Transactions are subject to the Competition Board's ("Board") approval. In this regard, the Turkish Competition Authority ("Authority") releases the Mergers and Acquisitions Overview Report each year to describe the overview of the Transactions examined within its body and thus provides a breakdown of the Transactions that took place in the market as along with a broad market overview. The Mergers and Acquisitions Report for 2022 ("Report") was published and made public by the Authority on January 6, 2023.
Number of Transactions Dropping in 2022 Compared to the Previous Year
According to the Report for the year 2022, the Board examined a total of 245 mergers and acquisitions during the year. The number of Transactions in 2022 decreased compared to 310 transactions in the previous year. However, as indicated in the Report, it can be concluded that the number of Transactions in 2022 is near the average, given that the average number of Transactions examined over the last ten years (2013-2022) is 219.
Of the 245 Transactions carried out in 2022, 39 are between companies of Turkish origin, 154 are between foreign companies, and 34 are between Turkish and foreign companies. Accordingly, foreign-to-foreign M&A transactions have the largest share in terms of the number of Transactions.
Whit regard to the Transaction values, a dramatic gap is observed between the Transaction values realized by Turkish and foreign-origin companies: the entire reported value of Transactions involving only companies of foreign origin is 5 trillion 580 billion TL, whereas Transactions involving only Turkish origin companies have a value of 25 billion 73 million TL. These numbers also highlight the difference between the values of Turkish-origin and foreign-origin companies. In addition, the Report states that the value of the reported mergers and acquisitions, to which both Turkish and foreign companies are parties, was 36 billion 224 million TL. Accordingly, it can be concluded that transactions carried out by foreign companies are the group with the highest transaction value.
Pursuant to Article 10 of the Competition Law, the Board may conduct a Phase II review of Transactions for which their effects on the market's competitive structure need a deeper examination. According to the Report, the Board decided to conduct a Phase II review of three M&A transactions in 2022 and approved one. The review process for the remaining two Transactions is still in progress.
United Arab Emirates and Netherlands Rank in First Place Among Foreign Investors
Based on the report's analysis of the distribution of foreign investors in Turkey, foreign investors invested a total of 43 billion TL in 36 separate Transactions, with Netherlands and United Arab Emirates investors taking the top spot. In 2021, in which there were 50 Transactions totalling around 22 billion TL, Luxembourg came in the first place, followed by the United States. In light of this, it can be observed that this table displays a declining tendency in 2022 when both the number of Transactions and the value of Transactions US Dollar exchange rate for the pertinent year are examined.
The Report also examined 145 Transactions made by foreigners overseas in 2022, with a total reported transaction value of 5 trillion 570 billion TL. In addition, the top industries in which investments were made globally in 2022 are as follows: (i) wholesale and retail trade and repair of motor vehicles and motorcycles, (ii) programming and broadcasting activities, (iii) repair and installation of machinery and equipment, (iv) manufacture of basic pharmaceutical products, (v) financial services, and (vi) manufacture of chemical products.
Electric Energy Sector Is on The Rise in 2022
The report states that, in 2022, the largest number and the highest value of M&A transactions occurred in the sector of “production, transmission, and distribution of electric energy”. Excluding the privatisation transactions, the Transactions in this sector constitute 11% of all Turkish Transactions, where the target company is set up as per the Turkish laws. In 2021, the largest number of Transactions were observed in the sector of “production, transmission, and distribution of electric energy”, and the highest value of Transaction belonged to the sectors of “production of plastic packaging materials”. This shows that there was a rapid increase in the Transaction values related to electric energy in 2022.
In terms of Transactions, where the target company is Turkey-based, the “production, transmission and distribution of electricity” sector was in first place with 20,5 billion TL. The sector of “production and distribution of electric, gas, steam and air conditioning” was in second place with the volume of 12,2 billion TL followed by the “accommodation and food service activities” sector.
The Privatisation with the Highest Transaction Value: Airport Management
According to the report, 7 privatisation Transactions were subject to the Board’s review in 2022. These Transactions occurred in following sectors: (i) production, transmission, and distribution of electric energy, (ii) airport management, (iii) import and distribution of natural gas, and (iv) manufacturing sector.
The "airport management" sector, with an approximate Transaction value of 9,75 billion TL, has the largest Transaction value among the aforementioned privatisation Transactions. As per the report, the privatisation transactions make up %16 of all transactions with target companies of Turkey origin.
By Zahide Altunbas Sancak, Partner, and Gokce Kuranel Albayrak, Senior Associate, Guleryuz & Partners