Carlyle sees Turkey M&A more active in 2011

By Birsen Altayli and Daren Butler

ISTANBUL (BestGrowthStock) – Private equity giant Carlyle Group (CYL.UL: ) expects Turkey’s mergers and acquisitions market to be much more active in 2011, boosted by expectations the country will achieve an investment grade rating, an Istanbul-based Carlyle executive told Reuters on Tuesday.

Investors are starting to show much more interest in Turkey, hit in 2009 by the poor global investment climate, said Carlyle MENA Investment Advisors managing director Can Deldag.

Washington, D.C.-based Carlyle has nearly $90 billion under management and has a $500 million Middle East and North Africa (MENA) fund which it closed in March 2009. It still has some resources left from that.

“2011 will be a much more active year…both in terms of the number of deals and the deal volume,” Deldag said of Turkey.

Merger and acquisition activity slumped to $3.9 billion in 2009 from $16.3 billion a year earlier and is seen reaching $15 billion this year, driven by privatizations, but still well below a 2005 peak of $30 billion, according to Ernst & Young data.

Last year’s slowdown came against a background of a near 5 percent contraction in the economy. Turkey is now expected to grow around 7 percent this year and positive signals on the country’s rating were also boosting confidence.

“There is an important expectation that Turkey will achieve investment grade… Seeing that, investors are starting to show much more interest in the Turkish market,” he said.

Moody’s revised its outlook on Turkey to positive from stable earlier this month but its Ba2 rating is still two notches below investment grade, like that of Standard & Poor’s. Fitch has Turkey at BB+, just one notch below investment grade.

Many analysts argue that Turkey’s economic fundamentals deserve an investment grade rating. But uncertainty generated by a general election in June next year could delay upgrades.

“Turkey inspires confidence due its fundamentals and because it emerged from the crisis relatively unscathed. There is a strong banking sector, the low level of household debt keeps domestic demand strong,” Deldag said.

He added Turkey was one of Carlyle’s priority markets.

“In Turkey all sectors have growth potential but some present more of an opportunity… For example healthcare, retail and energy,” he said.

Carlyle acquired a 40-percent stake in Medical Park, Turkey’s second-largest healthcare services company, at the end of 2009.

In March, it bought a 30-percent stake in Saudi Arabia’s General Lighting Company, the kingdom’s largest lighting fixture manufacturer.

(Writing by Daren Butler; Editing by David Cowell)

Carlyle sees Turkey M&A more active in 2011