Eurozone shows greater appetite for Turkish delight

But much has changed since the first – and even the second – wave of CEE accession. Turkey's Justice and Development (AK) party has been in power for a decade, and today Turkey is the world's 17th largest economy. FDI has increased more than 20x in the past 10 years, attracting $16bn in 2011 and, according to AT Kearney, Turkey ranked as the world's 13th most attractive destination for FDI in 2012. Fitch upgraded the country to investment grade status in November and GDP growth in 2011 was 8.5%. In a nutshell, Turkey now looks a bit like the first lot of succession countries 10 years ago, a year before their accession to the EU.

Private equity preferences
Last year, two of CEE's four final fund closes were for Turkish managers. Turkven, which is likely the country's most well-known manager, boasts the fact that it has no Turkish investors, which it says assures "independence and eliminates conflicts of interest". Mediterra Capital Partners, on the other hand, a new firm whose maiden fund held a second close in September on €135m, is backed by IFIs, including International Finance Corporation, European Bank for Reconstruction and Development (EBRD), Istanbul Venture Capital Initiative (iVCi) and Deutsche Investitions-und Entwicklungsgesellschaft mbH, member of KfW Bankengruppe (DEG) - typical backers for a first-time fund in CEE. But what is interesting is that it has Turkish industrialist families and entrepreneurs as well - on the one hand, vindication of interest in the fund; on the other, a deviation from Turkven's insinuation that domestic money is dirty.

Last year's second largest deal in CEE came from Turkey in Q2. In June, Cinven backed the €325m secondary buyout of Turkish alarm systems provider Pronet Güvenlik from Turkven. The deal was lucrative for the vendor, which had backed the business in 2006 in an €8m deal.

Such growth and interest from western European GPs is reminiscent of the first wave of accession countries a decade ago. Now that the European Union is languishing in low- or even negative-growth economies, the prospect of a large and wealthy new member could be more alluring. Brussels has another 10 years, according to prime minister Recep Tay yip Erdogan, to allow Turkey in before the country casts its eyes on other clubs. Should the eurozone continue its downward spiral, Turkey may not wait so long.

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• Topics
• CEE
• Buyouts
• Turkey
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• Turkven Private Equity