Netlog - An Abraaj Investment

Deal View with Omar Syed: Netlog

Omar Syed

Abraaj recently announced a partnership with the leading Turkish logistics company, Netlog. Founded in 2003, Netlog is today the largest integrated logistics firm in the country with a strong presence in Europe and Asia.

In this interview, Omar Syed, Partner at The Abraaj Group, shares his perspectives on the investment thesis for Netlog, the growth that lies ahead for the company, and why Abraaj is bullish on Turkey.

 Q: Netlog marks Abraaj’s 10th investment in Turkey. Can you tell us more about the investment rationale?

Omar Syed: Indeed. There are a number of reasons why Netlog is an exciting investment for the firm. Led by a highly experienced founding team of Sahap and Gokalp Cak, Netlog operates in a high growth sector, has a strong business model, and a proven track record to scale across verticals and markets, having successfully expanded over the years to Europe, Middle East, Asia and the United States. For example, Netlog’s acquisition of Bleckmann three years ago enabled it to increase operations in Europe and the United States and differentiate itself from its competitors in a highly fragmented industry.

At Abraaj, we are focused on leveraging innovation in the companies we partner with. Netlog was particularly compelling for us, given the company’s focus on specialized value-added services. Take PolarXp, a subsidiary of Netlog, it is the dominant market player and pioneer in temperature-controlled logistics in Turkey. We anticipate positive growth trends for this vertical given increasing outsourcing trends and regulatory changes favoring the use of cold-chain logistics in FMCG and other sectors. In a similar fashion, Netlog is exposed to an attractive set of consumer-driven sectors in Turkey such as food and beverage, retail and fashion – all of which are contributing significantly to the growth of the company.

Q: What makes the logistics sector an exciting one to invest in?

Omar Syed: Logistics is a core sector for Abraaj, and Turkey, like many growth markets, benefits from a thriving consumer class that underpins the continued dynamism of this sector. Consider this: Turkey’s geostrategic location at the crossroads of Europe and Asia means four hours of flight distance covers a neighboring market potential of 1.6 billion people, a combined GDP of US$ 27 trillion, and more than US$ 8 trillion of foreign trade. We also believe that the logistics sector will continue to play a key role in the long-term strategic development of Turkey, bolstered by the government’s plans to further upgrade its logistics infrastructure by 2023, with a focus on high speed rail, motorways and container port facilities. These developments continue to strengthen the investment potential of the sector for us.  Finally, I would add that Abraaj has a successful track record globally in the logistics sector and we are able to leverage our skills and experience gained from other markets and businesses and bring that to bear in Netlog.

Q: As an active growth investor, how will Abraaj partner with Netlog to expand the business?

Omar Syed: We see tremendous growth ahead for Netlog. As we discussed plans with our new partners, there was a clear alignment in terms of the Company’s next stage of development – to further cement their market leadership position in Turkey and continue regional expansion through organic and inorganic opportunities. In practice, this means evaluating bolt on opportunities and investing in infrastructure across the supply chain, from technology to talent. We will also support Netlog in transitioning from a family business to an institutionalized corporate with strong corporate governance and ESG standards.

Q: Turkey’s growth is driven by favorable demographics and strong domestic demand. Can you tell us about the investment climate in Turkey and what lies ahead for Abraaj?

Omar Syed: Turkey continues to present compelling long-term investment opportunities given the composition of the economy, strong demographics, and the diversity of the Turkish private sector. Despite political uncertainty in the past year, the Turkish economy over the past few quarters has posted robust growth figures. In Quarter 4, 2016, Turkey recorded a real GDP growth of 3.5%, followed by a real GDP growth of 5.0% in Quarter 1, 2017.

As long-term investors, we believe the consumer sentiment in Turkey is strong and our conviction to partner with high-growth companies operating in high-growth sectors is unchanged. We have been present in Turkey since 2007 and helped pioneer the private equity industry in the country. Our experience has shown that returns are driven largely by micro factors – we invest in companies and teams –  and that is where we are able to drive real value in our businesses. When we look at the performance of our partner companies in Turkey, we see evidence of improving consumer sentiment and macro trends. For example, both Hepsiburada and Fibabanka have so far posted healthy growth figures in the first half of the year.

Our investment in Netlog validates our consumer thesis, and represents the largest private equity investment made in a third party logistics business (3PL) in Turkey. Similarly moving forward, we will continue to evaluate new investment opportunities in Turkey in consumer-driven sectors with strong growth potential.

Read the press announcement of the transaction here: The Abraaj Group Partners with Leading Turkish Logistics Company Netlog

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