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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2007IS INVESTMENTWhat are the advantages of Private Equityinvestments and recent PE investmentsin Turkey?Efsane CamManager, Mergers and AcquisitionsIs InvestmentWhat are the Advantages ofPrivate Equity?Private equity provides long-term, committedshare capital, to help the companies grow andsucceed. The companies which are looking tostart up, expand, buy into a business, buy out adivision of the parent company, turnaround orrevitalize a company, private equity could be agood solution. Obtaining private equity is verydifferent from raising debt or a loan from alender, such as a bank. Lenders have a legalright to interest on a loan and repayment of thecapital, irrespective of the success or failure.Private equity is invested in exchange for astake in the company and, as shareholders; theinvestors’ returns are dependent on the growthand profitability of the business.Private equity backed companies have beenshown to grow faster than other types ofcompanies. This is made possible by theprovision of a combination of capital andexperienced personal input from private equityexecutives, which sets it apart from other formsof finance. Private equity can help the seller toachieve the ambitions for the company andprovide a stable base for strategic decisionmaking. The private equity firms will seek toincrease a company’s value to its owners,Private EquityMedium to long-term.Committed until “exit”.Provides a solid, flexible, capital base to meet futuregrowth and development plans of the company.Good for cash flow, as capital repayment, dividendand interest costs (if relevant) are tailored to thecompany's needs and to what it can afford.The returns to the private equity investor depend onthe business' growth and success. The moresuccessful the company is, the better the returns allinvestors will receive.If the business fails, private equity investors will rankalongside other shareholders, after the banks andother lenders, and stand to lose their investment.If the business runs into difficulties, the private equityfirm will work hard to ensure that the company isturned around.A true business partner, sharing the risks andrewards, with practical advice and expertise (asrequired) to assist the business success.without taking day-to-day management control.Although the seller may have a smaller share ofthe company, within a few years the seller willbenefit from the rapid growth of the companymore than the previous structure.Private equity firms often work in conjunctionwith other providers of finance and may be ableto help the company to put a total fundingpackage together for the business.The Advantages of Private Equity over SeniorDebtA provider of debt recollecting its investmentback by interest and capital repayment of theloan and it is usually secured either on businessassets or the shareholders’ personal assets. Asa last resort, if the company defaults on itsrepayments, the lender can put the businessinto receivership, which may lead to theliquidation of any assets. A bank may inextreme circumstances even ask for liquidationof the company to secure the receipt of itsfunding. Debt, which is secured in this way andwhich has a higher priority for repayment thanthat of general unsecured creditors is referredto as “senior debt”.By contrast, private equity is not secured on anyassets although part of the non-equity fundingpackage provided by the private equity firmSenior DebtShort to long-term.Not likely to be committed if the safety of the loan isthreatened. Overdrafts are payable on demand; loanfacilities can be payable on demand if the covenantsare not met.A useful source of finance if the debt to equity ratiois conservatively balanced and the company hasgood cash flow.Requires regular good cash flow to service interestand capital repayments.Depends on the company continuing to service itsinterest costs and to maintain the value of the assetson which the debt is secured.If the business fails, the lender generally has firstcall on the company's assets.If the business appears likely to fail, the lender couldput the business into receivership in order to safeguardits loan, and could make the shareholders personallybankrupt if personal guarantees have been given.Assistance available varies considerably.may seek some security. The private equity firm,therefore, often faces the risk of failure just likethe other shareholders. The private equity firm isan equity business partner and earns back itsinvestment by the company’s success,generally achieving its principle return throughrealizing a capital gain through an “exit” whichmay include:• Selling the shares to another investor (suchas another private equity firm)• A trade sale (the sale of company shares toanother)• Selling their shares back to the management• The company achieving a stock market listingAlthough private equity is generally provided aspart of a financing package, to simplifycomparison we compare private equity withsenior debt.Private Equity Compared to Senior DebtIt can be clearly concluded that private equityinvestments not only a source of fund, but alsoa substantial opportunity for creating extrasynergies in the globalizing business world likepartnerships for companies.PE Investments in the World and Turkey• After 2001, US Venture Capital and PrivateEquity Funds has been steadily increased.• Compared to 2004, EU Private Equity fundscreated was increased by 100% in 2005,reaching to EUR 4.25 billion• Between 2002 and 2005, Europe VentureCapital Capital and Private Equity Fundscompounded annual growth rate was 21.2%.Realized Investments’ (compounded annualgrowth rate was 8.64%.• The first attempts at private equity andventure capital activities in Turkey were madeunder state authority in the 1980s. However,the real private equity and venture capitalactivities began with the investments offoreign private equity/venture capital funds inTurkey.• The first attempts to arrange legal issuessurrounding venture capital activities in Turkeywere undertaken in 1993 and a CapitalMarkets Board (CMB) Decree dated 6 July1993 enabled venture capital companies tobe established in the form of InvestmentTrusts.• In 2006 nearly 10% of the total M&A deal iscompleted by the PE funds in Turkey with thehelp of domestic and international privateequity funds’ increasing interest• Is Venture Capital Fund is the biggest localprivate equity fund in Turkey, founded on5 October 2000. so far has realized 7investments and 2 exits. It is the only one thathas realized 2 exits in Turkey.• The table on page 11 summarizes themajor PE funds and their investmentsrealized in Turkey.PAGE 10
SEMI ANNUAL REPORT OCTOBER 200745,0004,50070,00011,000Total accumulated PE and realized PEinvestments in the US40,00035,00030,00025,00020,00015,00010,0005,00004,0003,5003,0002,500Total PE fundsaccumulated in the2,000 US (Million Euros)30,0001,500 Total PE investmentsrealized in the US20,0001,000 (Million Euros)500Total number of PE10,000investments realizedin the US002001 2002 2003 2004 2005 2001 2002 2003 2004 2005Total accumulated PE and realized PEinvestments in Europe60,00050,00040,00010,50010,0009,5009,0008,5008,000Total PE fundsaccumulated in Europe(Million Euros)Total PE investmentsrealized in Europe(Million Euros)Total number of PEinvestments realizedin EuropePrivate Equity Funds Origin Investments Year Investment Amount SectorIs Venture Capital Turkey 1. Probil 2002 USD 3.2 million Systems Integrator2. ITD 2002 USD 1.85 million Systems Integrator3. Cinemars 2003 USD 11.5 million Cinema Chain4. Nevotek 2003 USD 3 million Internet Protocols Solutions5. Step 2004 USD 3.5 million Carpet and Home Accessories6. Tuyap 2005 USD 7 million Fair Services7. Beyaz Filo 2006 USD 4 million Fleet RentalAIG Blue Voyage USA 1. Galatasaray 2000 USD 20 million Sports Club2. AFM 2001 USD 5 million Cinema Chain3. For You 2006 USD +20 million Cosmetics StoreTurkven/Advent Turkey / USA 1. UNO 2003 USD 8 million Floured Products2. Intercity 2004 USD 5 million Fleet Rental3. Trendtech 2005 USD 3 million Value Added Mobile Services4. Digiturk 2005 Not Disclosed Digital Broadcasting5. Pronet 2006 USD 4.2 million Security Services6. Roma Plastik 2006 USD 70 million PlasticsBedminster USA 1. Hedef Filo Kiralama 2006 Not Disclosed Fleet RentalKobi Venture Capital Turkey 1. Butek Makine 2006 USD 0.9 million Machinary Production2. Makim Makine 2007 USD 2 million Machinary ProductionVakif Venture Capital Turkey 1. Teknoplazma 1996 USD 0.5 million Technology2. Inova Teknoloji 1999 USD 0.5 million Biotechnology3. Ortadogu Yazilim 2000 USD 3.2 million SoftwareRecent Private Equity Activities in TurkeyVenture Capital Invested In Sector Year Investment AmountCitigroup Venture Capital International Beymen Branded Textiles 2007 USD 48 million (30%)Citigroup Venture Capital International Boyner Department Store 2007 USD 145 million (50%)KOBI Venture Capital Makim Makine Machinery Production 2007 USD 2 million (38%)KOBI Venture Capital Butek Makine Automobile Machinery Production 2006 USD 900,000 (45%)Goldman Sachs - Babcock & Brown TAV Airport Improvement and Management 2006 USD 315 millionBedminster Capital Hedef Fleet Fleet Rental 2006 Not Disclosed (100%)Citigroup VC ve Partners in Life Sciences Biofarma Pharmaceuticals 2006 Not Disclosed (USD 200-245 million)Credit Agricole Index Bilgisayar Computer Hardware 2006 USD 241 million (98%)Turkven/Advent Roma Plastik Plastic Covering 2006 USD 70 million (58%)ADM Capital Dardanel Food 2006 Not Disclosed (15%)ADM Capital Isiklar Holding Construction Materials 2006 Not Disclosed (20%)Ilab Holding Gittigidiyor.net Internet Portal Services 2006 Not DisclosedIlab Holding Kariyer.net Internet Portal Services 2006 Not Disclosed (68%)Docar (The International Investor) Renty A.S. (Esas Holding) Fleet Rental 2006 USD 13 millionFiba Capital Enda Enerji Holding A.S. Energy 2006 USD 2.5 million (2.5%)The International Investor Adabank Finance 2006 YTL 45.1 millionRenty (Esas Holding) Docar (TII) Fleet Rental 2006 USD 13 millionTexas Pacific Group Mey Icki Alcohol Beverages 2006 USD 810 million (LBO, 90%)Islamic Development Bank, Global Investment House TAV Airport Improvement and Management 2006 USD 150 millionBankcroft Standart Profil Automobile Spare Parts 2006 USD 90 million (LBO, 100%)AIG Blue Voyage Fund For You Pharmacy / Supermarket 2006 USD 20+ millionTurkven/Advent Pronet Security Services 2006 USD 4.2+ millionIs Venture Capital Beyaz Fleet Rental 2006 USD 4 millionTiger Global Investment Partners Mynet Internet Portal Services 2006 Not Disclosed (35%)Tiger Global Investment Partners Lift Medya Media 2006 Not DisclosedProvidence Digiturk Digital Broadcasting 2005 USD 250 million (40%)Fiba Capital M1 Tepe Alisveris Merkezleri Shopping Center 2005 Not DisclosedIs Venture Capital Tuyap Fair Services 2005 USD 7 millionTurkven/Advent Trendtech Value Added Mobile Services 2005 USD 3 millionAccess Turkey Capital Group Olgun Celik Automobile Spare Parts 2005 Not DisclosedThe International Investor Docar Fleet Rental 2005 USD 25 millionCONTACT INFORMATIONFor International Markets Contact Name Mr. Ilkay Dalkilic E-mail idalkilic@isyatirim.com.trFor Turkish Markets Contact Name Ms. Caglan Yazici E-mail cyazici@isyatirim.com.trFor Almaty/Kazakhstan Rep. Office Contact Name Mr. Cengiz Macun E-mail cmacun@isyatirim.com.tr Website www.isinvestment.comPAGE 11
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