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In Turkey, it has been said that everybody wants a grocery shop and not a supermarket. "It's a market full of egos and that's not just limited to lawyers....

In Turkey, it has been said that everybody wants a grocery shop and not a supermarket. "It's a market full of egos and that's not just limited to lawyers. The average capability and mindset of the local lawyer is not aligned to the concept of partnership," one commentator says. The Turkish legal market is fragmented and dispersed and this reality has been succinctly conveyed by one practitioner who says: "The market is mainly caused by White & Case who has given birth to 12 firms in the last 15 years and I'm not able to guess the number of lawyers who have worked for and continue to work in those 12 offices." In fact, a further example of this phenomenon occurred this year when the market witnessed a split in the top tier pairing of Hakan Yazici and Can Verdi (Verdi & Yazici) into the separate entities of YaziciLegal and Verdi Avukatlik Ortakligi. Nevertheless, while fragmentation might be painting a picture of how the market actually 'is', there has been perennial talk of consolidation and mergers between the small firms, in perhaps what might be expressed as an "ought". "We have been talking about consolidation in the market for 15 years and it did not happen," one partner says. "If Turkey grows, we might see more splits. Splits happen before law firms become too big and it gets more and more competitive as a result of the splits which might lead to mergers."

Another prominent reason for spin offs occurs when talented senior associates struggle to make partner status at well-established family owned firms and so decide to set up their own shop. This provides an opportunity for international firms, keen to exploit Turkey's rapid development but mindful of the bar restrictions, to partner with these spin offs as recently happened with Clifford Chance and Yegin Legal Consultancy. This is one reason as to why firms do not get big enough and also for why the traditionally established firms develop a gap in between the partners and junior lawyers. "There's nothing in the middle. International firms are starting to take the good lawyers from these firms; perhaps the senior associates, and create the Turkish face of it [the international firm]," one partner says.

In summary, the Turkish legal market may be divided into family owned firms, corporate firms, small sized spin offs, internationally aligned spin offs/firms and curiously, a breed of firms that was created when "the government introduced a whole class of clients to the market". Furthermore, early in 2012, Allen & Overy paved a new path for international firms into Turkey by establishing itself as a consultancy and not forming an exclusive partnership.

Finally, the major news on the legislative front is, as of July 1 2012, the introduction of the new Turkish Commercial Code. The old code had been regulating business life in Turkey for almost 55 years and the new code is an attempt to respond to major changes and developments in the local and international business environment. Generally speaking, the new code has been well received, however, there was a slight pushback as some market players were afraid that they would be unable to comply with the regulations. Additionally, a new Turkish Code of Obligations accompanies the Commercial Code and both instruments promise to usher in a new era in Turkish commerce and private practice.

CONTEXT AND TRENDS While Turkey's European neighbours plan to introduce austerity measures in the face of the prevailing debt crisis, another story is brewing where east meets west and it is one marked with continuing success. In late 2011, Turkish parliamentarians approved a budget that would expand public spending as it believes that this would dampen the expected economic slowdown as the country vigorously pursues its goal of becoming one of the top 10 economies in the world....

While Turkey's European neighbours plan to introduce austerity measures in the face of the prevailing debt crisis, another story is brewing where east meets west and it is one marked with continuing success. In late 2011, Turkish parliamentarians approved a budget that would expand public spending as it believes that this would dampen the expected economic slowdown as the country vigorously pursues its goal of becoming one of the top 10 economies in the world. Moreover, it's no coincidence that Erdogan's 2023 aspirations will fall on the 100th anniversary of the establishment of the Republic. Last year, the Turkish economy grew by 8% and this year, forecasters are conservative, with the IMF predicting a 2% growth and JPMorgan settled at 2.5%. The country's own government predicted a 4% growth and while it is clear that a slowdown is inevitable, it is growth nonetheless. "2005, 2006 and 2007 were probably the three golden years of Turkey, not only for the past decade but probably since the beginning. An average of $20 billion was invested by foreigners and a number of very high profile privatisation transactions were successfully closed," one partner says. "It grew rapidly at probably an average of 7-8% and obviously the 2007 and ongoing global financial crisis has had a negative impact on Turkey's economy and Turkey is not immune from outside problems, especially when the problems are mainly hurting Europe which is our neighbour and the closest trade partners."

Project finance is an area of considerable import as the country looks to diversify its energy resources and build infrastructure. In truth, Turkey is highly dependent on importing energy as it lacks oil and gas. "Energy purchases per annum in Turkey is around $50 billion," one partner says. "The current capacity in Turkey is around 50,000MW and in order to decrease that $50 billion deal, Turkey has ambitious plans to double its energy capacity generation within 10-15 years and this obviously will require substantial investments." Renewable energy has been a big topic in Turkey, particularly in solar, wind and hydropower, however, the simple fact is that in the grand scheme of things, this takes a very small slice of the pie. In the immediate, the country is committed to building four nuclear power plants to shore up its thermal coal and lignite possession and so guarantee its energy security. On the infrastructure side, Turkish desire is insatiable as the country's ambitious plans are set to drive growth for the foreseeable future. For example, work is already underway on the 421km Gebze-Orhangazi-Izmir Highway Project, which will include the second longest suspension bridge in the world and aims to cut the driving time from Istanbul to Izmir from 8 to 3.5 hours. Further major projects include plans for a third Bosphorus suspension bridge for Istanbul, and a new canal project, 'Canal Istanbul', which has been trumpeted to dwarf the Suez and Panama. Furthermore, one must not forget the $3 billion Marmaray Project, which appears to be nearing completion.

Turkey's Capital Markets Board (CMB) has been very busy of late modernising the country's capital markets and aligning them to EU practice. Nevertheless, the Istanbul Stock Exchange (ISE) is not as deep and developed as has been hoped. On the transactional front, however, it has been quite volatile but there has been far more activity on the debt than equity side and with the markets first ever sukuk (Islamic bond) issues this year, Islamic finance might become a trend for the future. Interestingly, there may indeed be a deeper reason for the ISE's non-success beyond unfavourable market conditions. "Other than the state owned enterprises, almost everything is owned by families," one partner says. "They may become quite reluctant to institutionalise and open all the information to the public and what not. So, they may actually prefer to go for financing rather than an IPO."

Finally, banks have the knowhow and capability to lend and indeed they are financing pretty much anything in need of financing. In fact, for the first time in Turkish history, there is more financing in outward investments, as Turkish companies look towards Eastern Europe. Additionally, over the last 12 months M&A has been vibrant and busy, especially at the mid-cap level and private equity funds are sniffing out big-ticket deals. "Around 250 deals have taken place last year. So, the number is high and if I'm not mistaken, only two or three of these 250 transactions was over $1 billion dollars and only 21 of those 250 were over $100 million," one practitioner says. "So, looking at 225 deals, each representing a value of less than $100 million dollars, the total was $14 billion."

MAJOR LATERAL HIRES

Melis Aritman Alp
From: Esin Attorney Partnership – Baker & McKenzie
To: Aritman Yildirim Aksun

Aylin Aksun
From: Esin Attorney Partnership – Baker & McKenzie
To: Aritman Yildirim Aksun

Gamze Çigdemtekin Özer
From: CCAO Law - Kinstellar
To: Çigdemtekin Sahbaz Attorney Partnership – Chadbourne & Parke

Banu Mert
From: Cerrahoglu Law Office
To: GSI Meridian

Funda Özsel
From: Bener Law Office
To: GSI Meridian

Serra Basoglu Gürkaynak
From: Coca Cola
To: Mehmet Gün & Partners

Şebnem Isık
From: Mehmet Gün & Partners
To: NSN Law Office

Kemal Serdengecti
From: Akol Avukatlik Bürosu – White & Case (Istanbul)
To: Pekin & Pekin

Can Verdi
From: Verdi & Yazici
To: Verdi Avukatlik Ortakligi

Hakan Yazici
From: Verdi & Yazici
To: YaziciLegal

Tamsyn Mileham
From: DLA Piper (London)
To: YükselKarkinKücük – DLA Piper

Ayca Sevimay
From Pekin & Pekin
To: n/a

Ömer Gundogdu
From: GSI Meridian

Hamit Erbay
From: GSI Meridian

MAJOR LEGISLATION CHANGES

The New Turkish Commercial Code
In effect as of July 1 2012