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November 29, 2010

Private Equity in Turkey

Agenda

3 21 29

Our understanding of Private Equity in Turkey


How Santa Consultants can help Appendix

Turkey has had growing volume of private equity transactions with market growth as the most important value creation lever
Characteristics of private equity in Turkey
Favorable investment environment with reservations
Turkish economy has demonstrated growth between 2002-2010 and forecasted GDP growth is one of the highest among OECD countries Increasing current account deficit and lack of transparency are some investor reservations

Growing volume of private equity transactions


While the first private equity investment occurred in 1995, there has been substantial increase in investments since, especially from 2005 to 2006

Abundance of family owned businesses Private Equity in Turkey


While abundance of family owned businesses creates challenges for private equity across all stages of an acquisition, weak succession planning increases availability of deals

Booming services industry


Turkey has had strong growth in the services industry since 1998 and private equity investments have historically been concentrated on this industry
* Based on a survey with private equity funds Source: Industry interviews, Santa research and analysis

Market growth as an important value creation lever


35% of value creation* is achieved through market growth and the weight of the lever is expected to stay about the same within the next 2-3 years

FAVORABLE INVESTMENT ENVIRONMENT WITH RESERVATIONS

Turkish economy has demonstrated solid growth since 2002 and the growth is expected to continue at 6.7% p.a. throughout 2017
Turkey's past and forecasted GDP growth rate
Turkey GDP Growth Rate, 2002-2010 (%)
9.4 6.2 5.3 8.4 6.9 4.7 Average: 4.88% 0.7 7.0

Comments
Turkey had the 16th largest economy in the world and 6th largest economy compared with EU countries in 2009 Since the banking crisis in 2001, Turkey's GDP has grown at an average 4.88%. This is due to implementation of sound economic policies, a tight fiscal policy, political stability combined with high growth throughout the world Turkey has recovered rapidly from the 2009 economic crisis due to a good export performance. Compared to other OECD countries, Turkey is expected to be among the highest growing economies mainly due to increasing exports, foreign investment and factor productivity

-4.7 2002 2003 2004 2005 2006 2007 2008 2009 2010f

Annual Average Real GDP Growth Forecast in OECD Countries, 2011-2017 (%)
6.7 4.9 4.7 4.5 4.1

3.4

2.8

2.6

2.6 1.2

Turkey SlovakiaHungary South Czech Korea Republic


Source: OECD, IMF, Morgan Stanley, Santa Analysis

UK

Poland

US

OECD Japan

FAVORABLE INVESTMENT ENVIRONMENT WITH RESERVATIONS

Turkey has performed better than most developed economies in 2009, the performance is above average among emerging economies
Turkey's economic performance in 2009
Change p.a. in debt-to-GDP ratio for select countries, 2006-2009 (%)
16.1

GDP growth rate for select countries, 2009-2010 (%)


Change in GDP Growth (%)

0.9

7.3 10.0 7.1

5.2

6.0

11.7

5.9

6.1

7.3

12.4

9.1

9.5 6.5 6.3 4.3 2.7 0.9 0.8 -0.2

7.0 4.5 2.8 1.6 1.2 1.2

2.1

-2.4 -4.2 -8.8 UK US Czech- China JapanGermanyBrazil Turkey Russia Rep. China Brazil US CzechRep Turkey Germany UK Japan -4.7 -4.7

-4.9

-5.2 -7.9 Russia

2009

2010

Increase in debt-to-GDP ratio for Turkey is below most of the developed economies as well as emerging economies. Turkey has strengthened its banking system following the 2001 crisis that held Turkey's economy relatively strong during the crisis. As derivate products were not widely used in Turkey, banks continued their profitability trend during the crisis Turkish economy bounced back from the negative GDP growth in 2009 fairly strongly. While the bounce-back is stronger than US, UK, Germany and Japan, compared to China and Russia, the growth has been weaker
Source: IMF, Worldbank, Morgan Stanley, Santa analysis

FAVORABLE INVESTMENT ENVIRONMENT WITH RESERVATIONS

FDI has increased considerably from 2002 to the credit crisis, and the increasing trend is expected to continue in 2010
Foreign direct investment in Turkey
Turkey FDI Volume (bn USD) and FDI to GDP ratio (%)
25 20 15 10 5

Comments
4.0 3.5 3.0 2.5 2.0

22.0 20.2 18.3

FDI-to-GDP FDI

10.0
7.9 1.8 2003 2.9

9.0

1.5 1.0 0.5 0.0

FDI in Turkey has shown a steady increase since 2002 due to improving key macroeconomic indicators in addition to achieving political stability. The value has decreased starting in 2008 due to credit crisis and has started the increasing trend in 2010 With the surge of FDI in 2007, FDI to GDP ratio has stayed above those of developing countries, however the decrease thereafter has put Turkey below Share of energy sector FDI is expected to increase in the near future. Insurance has been one of the active segments within financial services as it is underpenetrated while manufacturing is attractive due to cheap labor opportunities for European companies

1.1
0

2002

2004

2005

2006

2007

2008

2009 2010H1...*

Major Industries Invested in 2006-2009, based on value


4% 6% 3% 7% 44% 15%
Financial Services Manufacturing Transport, storage and communications Wholesale and retail trade Electricity, water and gas Real estate Other

22%

* Includes 2010H1 and value for BBVA-Garanti Bank transaction Source: Turkish Central Bank, Desktop Research, Santa analysis

FAVORABLE INVESTMENT ENVIRONMENT WITH RESERVATIONS

In spite of a favorable investment environment, some factors still create discomfort for foreign investors
Common reservations of foreign investors
1
Legal environment, enforcability of contracts, protection of shareholder rights and legal concepts familiar to private equity are not fully covered by the Turkish legal system. Slow moving legal environment is another disadvantage

Increasing current account deficit, is widening with increase in energy prices and appreciating TL as the country's competitiveness is decreased

Lack of transparency, cash transactions that stay out of the book are widespread in Turkey, this creates discomfort for foreign investors

Political stability concerns, results of elections expected to be held in 2011 may bring a coalition government bringing political instability

Potential government intervention, intervention of government in commercial matters, such as recent tax fine to a large media company, and changes in regulations and working environment pose risks

Source: Industry Interviews, Desktop Research, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Private equity investments have soared in Turkey starting in 2006 primarily due to stable economic growth
Private Equity Investments in Turkey, 2000-2010
Private Equity Investment Value, 2000-2010 (bn USD)*
# of deals with known values / total
16/16** 5/5 10/10 18/21 13/27 6/10 11/18

Comments
Since 2000, domestic private equity funds have shown an increase in activity which has in turn attracted international buy-out houses International buy-out houses have entered the market to compete for a number of the countrys largest assets as evidenced by Texas Pacific Groups acquisition of Mey Icki Increasing confidence in the countrys stability was further displayed in 2007 by KKRs acquisition of UN Ro-Ro for $1.2bn Number of deals kept increasing until the credit crisis. The increasing trend has started again in 2010 as number of deals started to increase globally as well

2.54

1.93 1.66 1.65 1.28

0.81

0.85 0.03 2000-4 average 0.09 2005 2006

0.65

0.89

0.45

0.45

2007

2008

2009

2010YTD

Very large deals***

Other deals

* Annual investment value only includes deals where value is known ** Includes the total number of private equity transactions within the timeperiod *** Transactions above USD 800m have been categorized as "very large deals"
Source: Ernst&Young M&A Reports, Industry Interviews, Desktop research, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Turkey's ratio of private equity investment to GDP is higher than CEE/CIS and Latin America regions whereas lower than certain countries
Private Equity Investment as a percentage of GDP (%)
2008 Value bn USD
28.3 7 6.3 2 7.5 3 9 2.5 0.4 2.7

1.20

0.90

0.67 0.61 0.53 0.40 0.22 0.16 0.15 0.14 0.37 0.29 0.18 0.21 0.29 0.32

0.24 0.15 0.07 0.06 Russia 2008

Emerging Asia

Latin America

CEE/CIS

South Africa

India

Brazil

China

Turkey

Poland 2007

Comments
Turkey's private equity investment to GDP ratio was above the CEE/CIS average in 2007 and 2008 Among major emerging economies, South Africa, India and Brazil have demonstrated higher ratios in 2007 than Turkey has If Turkey's ratio was to reach the Emerging Asia average, a further USD 653m would have been invested in 2008
Source: EMPEA, IMF, Desktop Research, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Key drivers of growth for the private equity market have been increased availability of companies and their challenges to accessing finance
Key drivers of growth for private equity investment
Economic Freedom of the World Index for select countries
9 8 7 6 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008

Major obstacle levels for firms in Turkey (% of companies perceiving the topic as an obstacle)
29 26 18 18 18 17

15 14 9 8

Access to Tax Rates Political Informal Unskilled Finance Instability Competition Workforce
All Firms SMEs

...

Turkey

United Kingdom

United States

Comments
Measure of conditions for private business have improved in Turkey (based on EFW Index) and it is getting closer to those of developed economies, leading to an increase in the number of companies of interest to private equity Turkey is experiencing growing domestic credit to private enterprises and a transition from a state-owned financial system to more private sector involvement, resulting in easier access to finance. Even though there are improvements, Turkish firms will require further financing and this gap can be bridged with private equity
* Based on survey with Turkish firms Source: Fraser Institute, Economic Freedom of the World (EFW) Index, Turkey ES 2008 (World Bank Report), Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Other key drivers for growth have been availability of local financing and increasing exit prospects
Other key drivers of growth for private equity

Availability of local financing


Private equity funds are able to find local leverage. Large transactions such as Migros and Un-Ro-Ro were financed by local banks

These two drivers are making all stages of private equity investments easier Increasing number of private equity funds operating in Turkey Increasing volume of private equity transactions

Improving exit prospects


Exit prospects for private equity is improving. Increasing FDI has demonstrated trade buyer interest while increasing number of active private equity funds are positive for the secondary market. "IPO Summit" in ISE is making the IPO route more attractive

Source: Industry Interviews, Desktop Research, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Global private equity funds have assets in Turkey while as expected, local players are ahead in terms of number of transactions
Private equity landscape in Turkey*
# of transactions***
13 12 11 10 9 8 7 6 5 4 3 2 1 0

Is Private Equity

Turkven

RHEA

Actera

Esas Holding Bancroft NBK Capital Investcorp Swicorp Eurasia 0 50

CVCI

Abraaj Capital

Bedminster Capital Carlyle Group Providence TPG HSBC PE 100 150 GEM 200 250 300 1,300 Average Deal Size (USD m)**

ADM Asian Dev Bank

KKR

* The chart does not include all private equity funds operating in Turkey ** Average deal size is calculated using deals with known values within 2000-2010 timeperiod *** # of transactions includes both deals with disclosed and undisclosed values within 2000-2010 timeperiod Source: Ernst&Young M&A Report, Deloitte Private Equity report, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

Average deal size in Turkey is higher than emerging markets although it is expected to decrease as the availability of medium-size deals increase
Private equity deal size and deal sources
Private equity deal size comparison of Turkey to other regions (m USD), 2007-2008
435
2007 2008

Comments
Deal size in Turkey is higher than emerging markets average and Asia primarily due to a number of very large deals - Un-Ro-Ro, Migros to name two as well as cultural issues related to selling equity at mediumsized enterprises Deal sizes globally were high due to abundance of credit and a high number of LBO transactions in 2007 Majority of deals in Turkey are sourced through investment banks/brokers although less so than in developed economies. Investment banks are perceived to be less successful in sourcing good deals, requiring funds to use other methods of identification Although "Approached by companies" category is low, it is expected to increase as the awareness for the asset class increases

215 158 106 107

196 61 69
Emerging Markets

58 66
Asia

38

74

Global

Europe

Turkey

Deal Sources in Turkey


3%
Individual Referrers

Turkey w/o very large deals*

20%
41% 28%
8%

Self-researched&identified

Approached by companies
Investment bank/brokers Others

* Un-Ro-Ro and Migros transactions have been discarded Source: Dealogic, EMPEA, GIA Asia Report, Desktop Research, Industry Interviews, Santa analysis

GROWING VOLUME OF PRIVATE EQUITY TRANSACTIONS

While there are challenges for private equity funds in Turkey, the landscape is improving in terms of legal, finance and HR
Challenges to sustainable growth for private equity

Outdated Commercial Law


There are gray areas in terms of taxation and deal structuring Bureaucracy and personal liabilities at the board level are barriers to investing

Minority Rights Issue


Legal framework is not protective of minority shareholders . Private equity funds willing to invest in minority deals need to carefully craft legal documents and perform personal due diligence for company owners carefully

Scarcity of Human Resources


There is scarcity of individuals that have experienced the various stages of a successful private equity transaction. This is especially important for top management positions at target firms

Commercial Law is in the process of being updated helping in creating a better private equity investment environment As private equity investment increases, highly skillled individuals work towards understanding fund expectations

Source: Industry Interviews, Desktop research, Santa analysis

BOOMING SERVICES INDUSTRY

Since 1998, the services sector has grown rapidly, with an average 30 percent annual growth
Analysis of Services sector in Turkey
GDP by sector in Turkey, 1998-2009 (TL bn) Value added as share of GDP by sector, 2008
100 100 9 100 2 100 7 100 4 100 5 100 6 100 7 100 1 100 1

140 120

16

24 29 38 31 31 29 27 25

22

100 80 60 40 20 0 1998
2000 2002 2004
Industry

33

51

62

60

62

65

66

67

68

75

77

2006

2008

Turkey Turkey Czech Bulgaria Poland Hungary Brazil Romania (1998) Rep

UK

US

Agriculture

Services

Agriculture

Industry

Services

The services sector has not only been the fastest growing in the past decade, but is also hit by the economic crisis to a lesser extent than the manufacturing sector Sector's relative contribution to GDP increased from 51% in 1998 to 62% in 2008 When compared to developing economies and the CEE, services sector contribution is generally lower in Turkey there is room for additional growth

Source: Turkey ES 2008 (World Bank Report), Desktop Research, Santa analysis

BOOMING SERVICES INDUSTRY

Retail has been the dominant sector in Turkey whereas TMT is one of the more common sectors for CEE and Asia
Private Equity Investment by Industry, comparison of Turkey to other regions
Turkey Private Equity Investment Value By Industry, 2006-2009* CEE Private Equity Investment Value By Industry, 2008 Asia Private Equity Investment Value By Industry, 2008

10% 22% 32% 3% 3% 26%

9%

7%

4% 0% 15%
52%

25% 17% 23%


20% 20%

12%

Retail

Transportation

Healthcare

Manufacturing

TMT

Other**

* Deals within 2006-2009 timeperiod has been added to make a representative sample due to a low number of deals with known values only in 2008 ** Other includes FSI, Agriculture, Construction, Energy and Food&Beverages. Food&Beverages industry makes up for 14,8% of total investment value in Turkey within the timeperiod Source: EVCA, GIA Asia Report, Desktop Research, Santa analysis

BOOMING SERVICES INDUSTRY

Healthcare has been another attractive sector for private equity funds within 2006-2009 timeperiod
Private Equity investment in healthcare sector
Industry
Retail
Healthcare Food and Beverages Manufacturing TMT Transportation Business Services Others

# of deals* Value (USD m)** Health expenditure per capita, 2008 (USD)
12
9 9 9 7 6 5 5

2075
1138 973 224 215 1481 220 126

7,538

3,737

3,696
3,129 3,060 1,781 1,213

852

767

US

Germany France

UK

OECD Czech Poland Republic

Mexico

Turkey

Healthcare has been the second most invested sector in terms of number of deals. Carlyle Group's investment in Medical Park and Abraaj Capital's investment in Acbadem Salk Hizmetleri are the largest investments in the sector Turkey's health expenditure per capita is among the lowest in OECD countries. As health spending is correlated to income, Turkey's lower than average figure is expected Growth in GDP and GDP per capita is expected to increase health expenditure which in turn will affect market growth rates
* Includes disclosed and undisclosed deals within 2006-2009 timeperiod ** Includes deals where value is known within 2006-2009 timeperiod Source: OECD Health data 2010, Deloitte Private Equity report, Ernst&Young M&A Report, Santa analysis

ABUNDANCE OF FAMILY OWNED BUSINESSES

Abundance of family-owned businesses present both challenges and opportunities for private equity funds
Challenges and opportunities
Due to Turkey's capitalist heritage, there are a large number of family business; level of institutionalization is not high and succession planning is usually weak. This environment creates a sustainable pipeline for private equity investors, yet comes with its own challenges

OPPORTUNITIES
As Turkish company owners are entrepreneurial in nature and are generally not strategic-thinkers, tackling critical strategy and marketing issues with a different perspective is beneficial Implementing corporate governance and a performance management culture becomes a key value creation element Good monitoring practices and strict focus on agreed business plan elements have potential to bring results Owners tend to have a revenue focus rather than EBITDA focus, private equity firms can restructure the cost base and put proper policies in place to increase profit margins

CHALLENGES
Owners tend to have an emotional attachment with their companies View private equity funds as sources of equity rather than the potential best practice it could bring and optimization it could perform Unrealistic price expectations Reluctance regarding selling majority stake Low level of corporate governance results in a low-level of transparency making it harder for outsiders to understand past actions Lack of data availability is hindering data mining and proper analytics in firms As the owners are generally the CEOs, private equity funds are usually not able to change the CEO, limiting possibilities for strategy change

Source: Industry Interviews, Santa analysis

MARKET GROWTH AS AN IMPORTANT VALUE CREATION LEVER

Market growth has been the dominant value creation lever so far, the share is expected to stay about the same in the upcoming years
Value creation lever analysis
Private Equity Value Creation Levers in Turkey (%)*
4% 3%

Comments
Substantial amount of private equity investment has been in retail, healthcare sectors which have been high growth sectors in Turkey confirming survey results Importance of leverage is expected to decrease slightly in line with global expectations due to debt becoming more expensive and financing terms more onerous

14%

19%

21%

21%

26%

21%

35%

36%

Last 2-3 years


Other

Next 2-3 years


Leverage Market Growth

Operational improvements through best practice implementation and optimization will drive profitability and this lever is expected to increase in the coming years, in line with global expectations. Operational improvements will require experience, expertise and process

Operational Improvement Multiple expansion

* Findings are the result of a survey with private equity funds and are based on estimates rather than statistical analysis Source: Industry Interviews, Desktop Research, Santa analysis

There are key challenges for private equity funds operating in the Turkish market
Main challenges throughout the life of a successful investment
Pre-Acquisition
Even though third parties conducting financial and legal due diligence is widely available, parties conducting insightful commercial due diligence, especially for mid-market are scarce Sector data including market size, market share is hard to find making the due diligence effort more cumbersome Increasing multiple expectations by target companies due to a variety of reasons including emotional attachment is an obstacle

Monitoring
High level of entrepreneurship in the country is resulting in poor strategic focus and unawareness of global trends Company owners generally have topline focus rather than EBITDA focus Implementing change requires higher level of effort due to resistance from owners and company employees As some business has been conducted off the record preacquisition, transparency in finance and accounting are key issues

Exit
Emerging market appetite worldwide needs to be maintained in order for favorable private equity exits to increase In order to demostrate company's true value, it is important to increase transparency, implement management dashboard and perform KPI benchmarking

IMPLICATIONS
Private equity funds need to understand the legal, tax and business environment within the country fully preacquisition and hire skilled people for operational excellence during monitoring
Source: Industry Interviews, Santa analysis

Agenda

3 21 29

Our understanding of Private Equity in Turkey

How Santa Consultants can help


Appendix

There are three main services offered to private equity funds; due diligence, cost reduction and 100-day plan
Mapping of private equity fund challenges to services offered
Pre-Acquisition
Even though third parties conducting financial and legal due diligence is widely available, parties conducting insightful commercial due diligence, especially for mid-market are scarce Sector data including market size, market share is hard to find making the due diligence effort more cumbersome Increasing multiple expectations by target companies due to a variety of reasons including emotional attachment is an obstacle

Monitoring
High level of entrepreneurship in the country is resulting in poor strategic focus and unawareness of global trends Company owners generally have topline focus rather than EBITDA focus Implementing change requires higher level of effort due to resistance from owners and company employees As some business has been conducted off the record preacquisition, transparency in finance and accounting are key issues

Exit
Emerging market appetite worldwide needs to be maintained in order for favorable private equity exits to increase In order to demostrate company's true value, it is important to increase transparency, implement management dashboard and perform KPI benchmarking

Due Diligence

Cost Reduction

100-day plan

Due Diligence and benefits to firms

Due Diligence involves providing an objective third party opinion to companies/investors looking to acquire or partner with target companies. It is important for companies/investors looking to acquire or partner with a company to better understand the market, competitors, risks and whether competitive advantages are sustainable within the planned investment period.

Benefit #1: Market and Competitor Analysis


Demand Curves and Growth Rates Sales Channels

Benefit #2: Current State Assessment


Customer / Supplier Competitive Concentration Advantages

Benefit #3: Business plan and risk analysis


Business Plan Analysis Risk Analysis

Identifying domestic and global market size and determining the growth forecast for the market Analyzing the various customer segments within the market in terms of size, purchasing behaviour and other criteria Analyzing current state of domestic and global competitiors and identifying strenghts/weaknesses Identifying risks and critical success factors within the market

Analyzing product profitability, customer and supplier concentration figures and change in these figures over time Identification of the firms competitive advantages following management, sector interviews, various other research methods and analyzing the sustainability of these advantages

Performing reality check regarding the managements business plan taking into account the market, competitors and companys competitive advantages Identifying the potential risks to be faced by the investor post-acquisition and developing appropriate risk mitigation strategies

Project Example: Private Equity Due Diligence

Customers Need
The private equity fund requested a third party opinion before acquiring minority stake in a Turkish agri-trading and processing company. Opinion was requested regarding: The attractiveness and growth potential of agriculture sector both domestically and globally Growth potential of the target firm and the risks associated with reaching this target The managements business plan

Highlights of Solution Proposed:


Activities performed during the project can be summarized as below: Using a variety of resources, agriculture sector was defined both domestically and globally. This was followed by the identification of market size, past growth rate and market growth forecasts Following a thorough analysis of target companys financial and accounting data, important metrics such as customer and supplier concentration was analyzed Through interviews with the firms domestic and international customers and suppliers, target firmss competitive position and advantages were identified Through a review of managements business plan and management interviews, target firms expectations of the future were understood and reality check was performed

Goal
Providing opinion regarding the feasibility of the managements business plan after gaining an understanding about the market, critical success factors and risks

Results
It was determined that the agriculture sector is expected to grow both domestically and globally As a result of customer and supplier interviews, target firms competitive advantages were determined by product and sustainability potential was analyzed Following an analysis of managements business plan, it was reported to the private equity fund that plans regarding certain products were realistic while some were overly aggressive

Cost reduction and benefits to firms

Cost reduction projects involve a thorough analysis of company's cost buckets, top-down bottom-up analysis to identify cost reduction potential and development of project progress measurement tools to make the cost cuts sustainable

Benefit #1: Understanding of cost drivers and trends


Company Cost Map

Benefit #2: Identification of cost reduction potential


Prioritization Matrix

Benefit #3: Measurement of project progress


Measure Sheets Cost Reduction Realization

Trend Analysis

Benchmarking

Based on the analysis of company's overall OPEX structure, performance matrix tool developed and used as data source for top-down and bottom-up analysis Each cost bucket is compared at different timeperiods to understand increase/decrease trends and cost drivers

Company's KPI values are calculated and compared to benchmark figures to identify top-down cost reduction potential Meetings/workshops conducted with relevant departments to perform bottom-up analysis Cost reduction projects are identified and prioritized based on impact and ease of implementation

In order to make cost cuts sustainable, KPIs are determined for each project and measure sheets are developed Project KPIs are tracked to calculate revized and realized cost reduction figures Cumulative figures are presented to top management

Project Example: Leading Telecom Operator


OPEX Cost Reduction

Customers Need
Turkish incumbent telecom operator's EBITDA margin was expected to decrease as the competition in the fixed line business is increasing and number of subscribers is falling. Client has asked to: Understand cost drivers and benchmark various cost buckets to peer operators Propose cost reduction initiatives where inefficiencies are identified using both topdown and bottom-up analysis methodology Measure effectiveness of cost reduction projects as part of the Cost Reduction Initiative PMO

Highlights of Solution Proposed:


Activities performed during the project can be summarized as below: Operator's overall OPEX structure analyzed and clustered into four main cost blocks: Marketing/Sales/Customer Care, Technical Field Service, Network Operations and G&A (incl. IT and Billing) Important cost buckets were compared at different time periods to perform a trend analysis and understand cost drivers Benchmark figures from peer operators were used to identify OPEX cost reduction potential, potential was discussed with department personnel to confirm the area using a bottom-up analysis Projects to reduce cost were scoped and discussed with project owners, KPIs were determined to measure project progress

Goal
Operational costs of the operator at Sales&Marketing, General&Admin, Network Operations and Technical Field Services areas are expected to decrease as a result of a list of cost reduction initiatives

Results
A significant amount of cost reduction potential was identified and discussed with top management for support Projects were scoped to decrease OPEX at the telco operator

100-day plan and benefits to firms

A 100-day plan is a detailed agreement on the steps necessary to achieve strategic and operational goals postsigning. A 100-day plan with well targeted actions can have a significant impact on the success of a deal. As the new plan will bring change to the organization, a continuous change management effort is necessary

Benefit #1: Assurance of business continuity


PMO office structure and processes Risk assessment and mitigation plan

Benefit #2: Refinement of strategy


Strategic analysis Impact of strategic initiatives

Benefit #3: Development of Value Capture Plan


Initiative prioritization Dashboard with KPIs

Gain full transparency into finance, operations, assets and IT infrastructure Perform risk assessment and develop a risk mitigation plan Develop employee, customer retention and supplier communication plans Develop PMO office structure and processes to bridge gap between strategy and execution

Review strategy with management and private equity firm to gain alignment Analyze key elements of the strategy (investigate upside opportunities, risks, new developments post-signing) Prioritize major strategic initiatives based on impact and ease of implementation, ensure they are linked to 100-day plan

Perform screening analysis to identify possible areas of opportunity Prioritized list of initiatives broken down into three categories: quick-wins, Wave I prioritized initiatives, all other initiatives Develop initiative template for each potential opportunity Develop dashboard wth KPIs and target values plus tracking process for value capture implementation

Scope of the 100-day program

Initial Due Diligence

Deal Structuring

Postsigning, preclosing

First 100 days

Medium / long-term

Exit

Key Elements Out of scope


Banker road shows Legal due diligence Accounting due diligence Regulatory filings

In scope
Governance and organizational change Risk management and maintenance of business Refinement of strategy and investment thesis Creation of value capture plan, with robust analysis, clear KPI targets and budgets Alignment and mobilization of the company

Agenda

3 21 29

Our understanding of Private Equity in Turkey How Santa Consultants can help

Appendix

About Santa Consultants


About Santa Consultants

Who are we

What are we working on We focus on the following areas:

Santa Consultants helps companies improve their business through formulizing innovative solutions to their issues We provide value to our clients by making recommendations for their business issues, and also by helping implement these recommendations We have a collaborative working style and use an analytical and structured approach to solving business issues

Strategy: Due Diligence, 100-day plan Organizational: Change Management

Operational: Business Process Redesign, Cost Reduction


Technology: CRM System Analysis

Santa Consultants has completed the projects below


COUNTRY CUSTOMER ENGAGEMENT TOPIC

Private Equity Company*

Performed commercial due diligence for a global private equity company planning to invest in an agri-commodities trading and processing company in Turkey

TURKEY Leading Telecom Operator* Managing the initiatives, within the Program Management Office, to reduce cost at Sales&Marketing and General&Admin departments and analyzing opportunities for low cost energy sourcing at a leading telecommunications operator in Turkey Supported the equipment manufacturer during its partner/vendor selection process to increase its presence in the Turkish market

Global Telecommunications Equipment Manufacturer

Services Company

Advised a supply chain consultancy firm regarding product portfolio management and sales best practices

Media Company Internet sector

Managed the development of the growth strategy for an internet business within the photosharing and printing sector and supported the implementation this strategy

* Partly subcontracted from a global management consulting firm

Santa Consultants has completed the projects below

COUNTRY

CUSTOMER

ENGAGEMENT TOPIC

Leading Telecom Operator*


SAUDI ARABIA

Developed and executed a change management plan to ease the migration to the new CRM software (Siebel) for the employees and to increase user adoption within all business units of a leading telecommunications operator in Saudi Arabia

Energy Company NORTHERN CYPRUS

Performed feasibility analysis for a company looking to invest in the energy sector in Northern Cyprus

* Partly subcontracted from a global management consulting firm

Bykdere Caddesi, Tevfik Erdnmez Sokak Blok:13 Daire:2 Esentepe Istanbul TURKEY Phone: +90-212-347-1377 Fax: +90-212-210-8069 Email: info@santaconsultants.com

The information contained in this document, much of which is confidential to Santa Danismanlik Ticaret Limited Sirketi, is for the sole use of the intended recipients. No part of this document may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Santa Danismanlik.