A Turkish management duo has launched the country’s first sizeable private equity fund since the end of the industry’s heyday in 2007 – a reflection of Turkey’s rapidly growing economic clout. Mediterra Capital Management is poised to announce on Monday that it has raised an initial €100m for a fund that will specialise in buying medium-sized companies.
Murat Erkurt – one of Mediterra’s two partners – said the fund was the first to persuade 10 of Turkey’s 50 richest individuals and industrialists to invest in local private equity: “This shows the confidence in their home country’s fast growing medium-sized companies.”
Mr Erkurt, a former partner at Lehman Brothers private equity unit, set up the fund with Ahmet Faralyali, a former KKR executive.
Turkey is one of Europe’s most rapidly expanding economies. Exports have risen more than tenfold in the past decade. Economists forecast the country will be the continent’s third-largest economy in this decade.
Goldman Sachs, the investment bank, labelled Turkey one of 10 “growth markets” poised to dominate the world’s economic expansion in the next few years thanks to rising productivity and population.
Mediterra emphasises how private equity fund investors are turning to emerging markets amid lacklustre investment opportunities in the developed world since the financial crisis concluded the previous deal bonanza.
Mr Erkurt said the first fund had mainly been backed by public investors such as the European Bank for Reconstruction and Development.
But he said there was a long list of large institutional investors from Europe and the Middle East who sought to invest in the second round of fundraising. The fund will target commitments of €250m ($358m) by the year’s end.
Mediterra plans to invest in medium-sized deals worth up to €250m – an under-represented market segment in Turkey because many private equity managers have had difficulty finding access to the often family-owned companies.
International private equity firms such as TPG and KKR have made occasional large deals in Turkey during the past few years, the record takeover being BC Partners’ $3.2bn buy-out of supermarket chain Migros in 2008.
But the country has lacked the steady trickle of midsize transactions that is common in other parts of Europe.
Turkey sports more than 2,500 medium-sized companies, which account for about 75 per cent of its economic output.
Mediterra’s first-time fund is formed as the global private equity industry gears up to tap investors for fresh money, after a long drought of deals and fundraising during the past few years.
An excerpt from Financial Times daily publication