Abraaj brushes off Turkey concerns

The firm’s head of Turkey says macro issues are not affecting investment pace, and expects to close 4-5 investments in the next two years.

Emerging markets specialist The Abraaj Group is confident that Turkey’s fundamentals outweigh the recent political turmoil as it looks to close as many as five deals in the country in the next two years.

The firm has raised $526 million for its debut Turkey-dedicated vehicle, $40 million of which is for co-investment, and Selçuk Yorgancioglu, partner and regional head of Turkey and Central Asia at Abraaj, is sanguine about the firm’s ability to successfully put capital to work in the region.

“Currently the Turkish lira is at an all-time low. Deploying from a dollar fund is actually very advantageous now, we have a head-start and it gives a decent cushion to our dollar returns,” Yorgancioglu told Private Equity International. “It’s actually an opportune time for us on that aspect.”

Yorgancioglu said Abraaj is currently in negotiations for three transactions, and is looking to invest in a total of six to eight portfolio companies. The fund has already made two investments – the first, shortly after the first close in February 2015, in e-commerce platform Hepsiburada, and the second last month in Fibabanka, which focuses on commercial, corporate and SME customer segments.

Yorgancioglu dismissed suggestions that the last two years have been a tough time to raise a Turkey fund, pointing to the firm’s track record of $900 million invested into 11 companies in the country and four successful exits, including hospital chain Acibadem, which it sold to Malaysian sovereign wealth fund Khazanah in December 2011.

“Clearly emerging markets private equity fundraising might have been a challenge in the last few years. But for us, we went out to raise $500 million to deploy in mid-cap, which is where we feel the money is to be made, where the returns are. We followed the due process and right after the first close we started investing, our investors saw that we were delivering what we promised,” he said.

“Clearly it wasn’t very easy, but it wasn’t difficult either.”

Yorgancioglu said in the Turkish market there are “plenty of young, successful companies, well managed with decent liquidity situations, which benefit greatly from the capital we put in”, and that “well-run companies with smart investors are never desperate, they always have staying power”.

Yorgancioglu, who refused to be drawn on the exact make-up of the fund’s investor base, said that for those investors in the fund who are gaining exposure to the Turkish market for the first time, the country’s positive demographics – a population of 80 million with an average age of 29, average GDP growth rate of more than 4 percent over the last 20 years, and an OECD country – are a key attraction.

“For the first-time investors in Turkey, [of] whom we have a few in the fund, the opportunity is to start getting familiar with this attractive market with someone who has proven to be a safe pair of hands. Also when they invest with us they’re also able to co-invest when there’s a need, so that’s another [attraction].”