​Turkey: Looking South

Dogged by corruption and political instability, Turkey has seen a fall-off in its foreign M&A lifeblood. But there is potential in closer ties with Iran

Protestors eager for political change have stirred up a degree of nervousness in Turkey over the past year but the legal market managed to stay solid, with strong interest from foreign firms and investors.

However, it looks like it will not escape unscathed this year as elections on the horizon and a corruption scandal over alleged bribery in public tenders is predicted to precipitate a fall-off in activity.

istanbul turkey

In 2013 the M&A market, which has always been strong, did not disappoint. In fact, it saw record levels of activity, with 328 deals involving a Turkish target according to Thomson Reuters, and transactions were across many sectors. However, the value of those deals and the foreign involvement were not so impressive.


“Of those 300-plus deals, about 110 had some foreign element,” says Pekin & Pekin managing partner Fethi Pekin. “That’s the lowest it’s been. Foreign involvement used to be at least 50/50. As well as that, only four deals met $1bn (£611m) in value, and only 20 or so reached $100m. The average deal value was less than $40m, with most being small and local-to-local.”

According to Thomson Reuters, domestic deals dominated the corporate market, accounting for over $12bn of the $15bn total market value, or 209 deals.

Foreign investment has slowed too.

“Total foreign direct investment is about $10bn – that’s low,” says Pekin. “Turkey is a dependent country in terms of foreign investment and it needs $20bn a year.

“We saw $20bn in only three years – 2005, 2006, 2007. Then there was the global crisis and it dropped to $7bn. It’s now at $10bn. The 2023 target is $80bn. This is ambitious. We’ll do our best but given the global financial situation, it doesn’t seem realistic – $20bn is realistic.”

The forecast for M&A in 2014 does not look too good either.

Gorkem Gokce

“There will be a considerable fall in M&A, both in value and volume,” says Gokce Attorney Partnership managing partner Gorkem Gokce, who blames the shift on political instability.

“The number of M&A deals is falling in parallel with the world economy,” adds founding partner of new boutique Firat-Izgi Attorneys at Law, Sevi Firat. “I don’t see too many M&A deals, and that affects firms doing M&A business.”

Privatisation possibilities

However, lawyers argue that there are other opportunities, such as privatisations.

“There will be opportunities, but of a different nature,” says Gokce. “The government will push privatisations, for example.”

Firat disagrees: “Privatisation may not be busy because there aren’t many facilities left to privatise.”

Contentious work is also likely to provide work believes Mehmet Gün & Partners managing partner Mehmet Gün, who says counter-cyclical activity will keep firms afloat.

“The legal market will continue to improve,” he says. “If corporate goes down, litigation goes up.”

“Litigation will increase,” adds Bener partner Win Michaelsen.

Infrastructure has been strong of late in Turkey but the prospects for new work seem bleak.

“I’m not aware of many large infrastructure projects except for highways and the Istanbul airport, which supposedly will be the biggest in Europe,” says Gokce. 

The airport project was announced in 2013, with plans to construct an international airport with six runways at a cost of €7bn (£5.8bn), although work will not begin until 2017.

One reason for the legal market’s pessimism is political instability, although upcoming elections might ease the situation. Local elections are set for March and presidential elections for August.

“Elections slow the market,” says Gokce, adding that he does not think the ruling Justice and Development party will be defeated.

The government is also fighting a corruption scandal. In December 2013 more than 50 people, including three cabinet ministers’ sons, the director-general of state-owned bank Halkbank and the deputy national security chief, were arrested over bribery allegations (see timeline, below).

Despite the scandal, some lawyers are confident political issues are not a major concern.


“Turkey will never be like the Middle East,” says Gün, pondering his country’s neighbours that are struggling to find stability. “We’ll have issues, but Turkey will stay strong.”

“There are internal issues such as corruption but it can happen everywhere,” adds Pekin. “This is a stable and democratic country and these will be overcome in no time.”

EU membership is an ongoing debate. In January prime minister Recep Tayyip Erdogan made his first visit to Brussels in five years to renew talks with the EU.

“The EU has always been on the agenda but it has lost its priority for almost everyone,” says Gokce. “Even I don’t care about EU news any more.” 

“EU membership is important,” adds Pekin. “The EU helped us come out strong from a major crisis. EU issues need to be treated carefully. When the time comes Turkey will decide whether to join or not, but there’s no alternative and the EU needs us in its financial situation.”

Not all agree that joining the EU will be beneficial. Bener’s Michaelsen saying he believes Turkey is better off outside the union.

The beauty contest

Despite the pessimistic forecast for 2014, the longer term looks brighter.

“This is an emerging market. There are many emerging markets – it’s like a beauty contest,” points out Pekin. “These countries offer the same opportunities. There’s foreign investment in all and they have more or less the same projects in the pipeline. Money doesn’t have an address – it goes where it will benefit the most.”


“Hopefully, 2015 will be much better,” concludes Bener managing partner Erim Bener.

Turkey timeline


Pick a side – East or West 

Mehmet Gün, partner, Mehmet Gün & Partners

President Abdullah Gül once said that when he travelled in the US,
if he could not find a mosque he would pray in a church as both are holy. This would be true for many Turks, as humanism is in their hearts. 

A visit to Miniaturk in Istanbul shows how much the Ottoman culture was influenced by the West. Since Ottoman times Turks have been trying to learn from the West and adopt its values, principles and ways of life. [President Mustafa Kemal] Atatürk’s heritage to youth has been interpreted as ‘catching up with Europe’.

Laws are either adaptations of European ones or influenced by the West. The state administrative system is based on French law, while the commercial and civil codes and civil procedural law are based on German, Swiss and French law.

Turkey has its biggest economic ties with the West. Many thousands of Turks study, work and live in the West, transferring the culture of business and way of life. Hence Turkey is more similar to the West, while Turks understand the East and can amalgamate the two in a unique synthesis.

Erim Bener, managing partner, Bener Law Office

Turkey has an interesting society with many complexities and polarisations that create challenges as well as providing tremendous advantages.

Whether Turkey is culturally aligned with the East or West depends on your perspective. From the corporate point of view, the ethos has been changing and is now closer to Europe, driven by corporate strategies, generational change, the influx of foreign expertise and government policy.

But when talking about the cultural soul of the nation, it tends slightly to the East. 

In fact, the futility of trying to categorise Turkish culture is one of the country’s greatest strengths; its people are adept at juggling cultures, bolstering its ability to profit as a hub not only between East and West, but also North Africa and the CIS.

Sevi Firat, partner, Firat-Izgi Attorneys at Law

Categorising Turkey as either an Eastern or a Western country must always be inadequate. Labelling it Western would be to ignore the Eastern elements in its culture, while labelling it Eastern would be to ignore some dominant Western elements.

What Turkey has inherited and continues to build on is a mixture of European, Asian and Mediterranean values.

Therefore, although it is a cliché, describing Turkey as a bridge between civilisations reflects not only its geographical location but also the social framework that shapes its mindset.

Turkey and Iran could be set for closer ties after Turkish prime minister Recep Tayyip Erdoğan visited Iran in January. He met the Iranian leader Ayatollah Ali Khamenei and president Hassan Rouhani.

“Turkey has been at peace with Iran for more than 300 years,” says Mehmet Gün & Partners’ Mehmet Gün. “The most obvious benefits for Turkey are oil and gas. We don’t have those resources.”

More business with Iran is likely to affect the legal market, and could be just the boost it needs.

“We’ve been a hub for eastern and southern neighbours,” adds Mehmet Gün corporate partner Serra Basoglu Gürkaynak. “This is one reason investment has flowed into Turkey.”