Interview with Evren Ozturk, CFO of the YILDIRIM group

Can you please give an overview of the YILDIRIM Group?

Founded in Türkiye in 1963, YILDIRIM is a family-owned industrial conglomerate, headquartered in Amsterdam and Istanbul. We operate globally in 56 countries through more than 200 companies, employing 25,000 people.

The business has five core pillars which collectively provide more than 80% of our revenues: metals and mining, port operations, fertilizers and chemicals, logistics, and energy. We also operate in financial services, construction, real estate, and international trade.

What is your experience of doing M&A in the CEE region?

In total, we have undertaken more than USD 5bn in M&A deals. All of them have been event driven: either the seller wanted to dispose of a non-core asset, or they wanted to divest because of a distressed position.

In CEE, the culture is often very different from Northern and Western Europe, but there are more similarities with Türkiye. We have a very seasoned approach to M&A transactions: momentum is key, regardless of the country or the counterparty. In a public or private deal or with a governmental entity, you need to keep the dialogue flowing, leave things on the table. It’s important to use an agile approach with dedicated teams and a dedicated mindset. It’s really important to explain to your team and the counterparty’s team what the issues will be, and to engage with your legal advisors on due diligence. There’s no time for disagreement. Focus on the main target and you can get the right results.

It’s important to understand governance and culture in CEE, but since we operate in 56 countries, we have enough experience to deal with that. Once we own a company, we never touch the local culture by sending a bunch of people from HQ to try and change things because we respect and understand it. We do, however, bring in key management to understand how they run the business and what the problems are because we mostly invest in distressed situations. Once we understand it, we apply and customise our best practices for logistics, operation, trade, and finance.

Regardless of the culture, company, or country, we have a well-proven approach that can easily be applied to any situation and any culture.

Have CEE-based companies been a good cultural fit?

Yes, we have the advantage of a common history - for example, Albania is quite similar to us. Whereas Middle Eastern culture is less direct, and Northern and Western Europe are more direct. In our region, the culture is more implied. We’re used to that because we created the company in Türkiye with this mentality. Being from Türkiye is an advantage for making deals in CEE countries.

What were the challenges in your acquisition of Alchrome in Albania?

We have done three CEE deals with CMS: in Kosovo, Albania and Croatia. From our experience, the Albanian one was the most challenging because it is country with different dynamics in many aspects. They have very talented and well-educated executives serving Albanian companies and entities.

Albanian authorities are sick and tired of companies trying to get some free concessions from the country. They don’t want that type of investor. Initially, we explained our business to the Prime Minister, Edi Rama. A very direct person, he told us that many companies come to Albania and then disappear: everybody’s just trying to get something from the country.

We told him that our intentions were different. We offered more than USD 85m and said we’re going to invest more, we could expand capacity, comply with ESG regulations and create a sustainable company in Albania. We would respect the local talent, the local culture, keep Albanian people on board, make green investments with solar panels, and initiate green ferrochrome production. He was impressed, but there was still a long way to go.

A year later, we visited him again and we showed him what we had achieved in the mining and production facilities. He was really impressed. We were trying to get the relevant permissions from Albanian authorities for solar energy production and he instructed his ministers to ease the process now that he saw that we were serious investors in his country.

In the deal, both parties were family-owned companies. There were some difficulties concerning both sponsors, suggesting that the counter team and the advisors slowed the process, creating obstacles. Struggling with both sponsors was a very challenging experience. We had hard time educating them and explaining the rationale. Both of them eventually understood us and we got their sign off to proceed with the deal. As for the regulatory framework, it was relatively easier than the rest of the Europe because everybody wanted to make things happen.

When you say easier, is that because Albania is not in the EU?

Yes. And because it’s a small country, everybody understands that foreign direct investment is so important. When you invest in Belgium, for example, it’s much tougher, but in Croatia and Albania, because they are small countries, everybody’s motivated to make things happen. It’s easier and quicker. Everybody is more reachable and available. It’s less challenging. The challenge is the deal itself, but from a regulatory perspective, it’s easier than it is in the rest of Europe.

How important is ESG in M&A transactions in CEE? 

Of course, ESG is important for climate change, global warming, and decarbonisation, but not all countries are in line with the regulations. Europe is at the frontier. But from what I see, European markets are losing their industry as a result. Europe is putting more and more regulation in place, while the rest of the world has nothing in place like these regulations.

In the fertiliser sector, there’s not much protection from the EU: China and others invade the European markets. As a company, it is not possible for us be at the frontier of decarbonisation because we’re in hard industries. Most companies showcasing decarbonization efforts are doing this for cheap financing. There’s a lot of greenwashing.

In Albania, we intend to be greener and we’re committed to the 2050 target. We’re switching to green energy sources, putting in solar panels. Because the sector is very male-dominated, we’re trying to bring in female workforce, especially to the mid-level and high-level management. We try to be more inclusive and equal, because the CEE mentality has a history of masculine tendency: we’re trying to get rid of that. Governance is strong, we have the most transparent audit, regulation and compliance committees.

How would you describe bank requirements for ESG compliance in financing M&A?

Raiffeisen Bank financed our Albania deal: In three years’ time, we will get our money back thanks to the consolidation effect. It’s a very lucrative business and it is very preferable for the bank. But the bank naturally wants to ensure that ESG regulations are in place. It enables cheaper financing: a good way to attract investment and motivate professionals in the company.

Albania has a less efficient energy system, so we have to change. We’ve put more diverse management in place to create more diversity and inclusion, and invited people from the union to the committees, plus experts from the region and other sectors.

These actions are appreciated by the banks. I made a presentation to the CEO of Raiffeisen Bank. He was impressed because it’s so difficult to change these types of things in Albania. There are many obstacles: bias against other nationalities, against women, against change. We’re very happy with what we have achieved in Albania. We believe in the country so much. It’s developing fast as the next candidate for EU membership.

Future interest in the CEE region?

Yes, because it is still attractive and the region can provide a lot compared to the rest of the Europe. There are challengers, survivors. That’s why they’re very keen to do well. CEE has hard workers who are motivated, skilful and well-educated. We consider doing more acquisitions because some industries in the region are ripe for consolidation. Bulgaria, Romania, and Croatia are the countries of most interest. But Macedonia, Hungary, Albania and Kosovo, are also interesting to us.

In CEE, small investors and owners will continue to exit, either because they don’t have the war chest to face the challenging energy prices after the Russian invasion of Ukraine, or for tightening ESG regulations. Nobody can easily withstand these headwinds, so they want to either exit or merge. It means more opportunities to consolidate and create a powerful portfolio in the region.