Interview with Cagatay Ozdogru, CEO of ESAS
Established in 1966 by Haci Omer Sabanci and his six sons, Sabanci Holding is now the second largest industrial and financial conglomerate in Turkey. The Sabanci family still own 61%; the remaining 39% is listed on the Istanbul Stock Exchange. The business employs 65,000 employees across 15 countries and generates revenue of 4.3 billion USD. In 2000, one of the founders Sevket Sabanci, while retaining his shares in Sabanci Holding, pulled out from active duties and established Esas Holding as a new platform for further investments.
Today Esas is the largest family office in Turkey making direct private equity investments at home and abroad. Esas focuses on direct investments funded by its own balance sheet rather than Limited Partners. Esas’ investments span six core industries: aviation, retail, entertainment & leisure, healthcare, food, real estate, and logistics. At the time of writing, Esas holds more than 2 billion USD worth of assets under management, from 12 portfolio companies.
Cagatay Ozdogru, Esas CEO, spoke to Tharawat Magazine about the business model behind the family office and why it’s important to professionalise early.
What prompted the Sabanci family to set up a family office in 2000?
Our chairman Sevket Sabanci has been living in London for the last 30 years. He is the person who opened up Sabanci Holding to the world. Mr. Sabanci has always been very close to Western business families. He analysed examples such as the Rothschild family and how they preserved their wealth for so many years. He understood that families should structure themselves to assure their continuity for the next generations.
Mr. Sabanci’s daughter Emine set up Esas. Initially, it was focused on venture capital investments. However, we realised a few years after the foundation that the business model should be geared towards investments in established companies.
How did you come to join Esas?
I have multiple engineering degrees and until 2002, I worked for multinational high-tech companies such as Unisys, IBM, Sprint and France Telecom Group. My last position was VP of the Middle East and Africa at France Telecom Orange. In 2002, I joined Sabanci Holding to head their IT and telecommunications investments and to help them with the privatisation of Turk Telekom.
By August 2005, I had made it onto Esas’ executive committee. Esas was mainly a venture-capital investor until 2010 even though we had some PE type of investments such as Pegasus Airlines and Peyman Food Co. In 2010, the Group decided to establish a professional PE team and commit itself to the PE industry. The board promoted me to CEO, and I established a very organised and competent PE team here at Esas. Since then, we have grown dramatically and become one of the best PE teams here in Turkey.
Today, Esas is a company which promotes entrepreneurship. Our business model is based on sharing our business know-how, financial strength and operational experience with the companies we invest in. We create value and share it with everyone who contributed. We are committed to creating good companies. The journey we’re going through with our portfolio companies is so unique, and I believe this makes Esas one of the most exciting companies to work for.
How has your previous experience helped you be successful in your current position?
I think three things have contributed to my success. Firstly, I was appointed to executive positions in my early thirties. I’ve been through many ups and downs, and I’m used to the responsibility.
Secondly, in Sabanci I managed a portfolio of four different high-tech companies; through my experience in structuring companies and managing risk, I see myself as an entrepreneur. This is important when you are in the business of acquiring companies. You have to know how to grow a company no matter what the industry and no matter how different it is from your previous experiences.
Thirdly, my career has taught me discipline. At Esas, we want to achieve fast and significant growth in a shorter amount of time and performing consistently requires discipline.
What is the Sabanci family’s role today in Esas?
Our Chairman, Sevket Sabanci has lifelong experience in this business. I talk to him once a week about our projects and other general issues. I love meeting with him because I learn something new every time. Our Vice-Chair is his daughter Emine Kamisli; she is in charge of the family office’s treasury activities. His other son Ali Sabanci is also a board member at Esas and is mainly in charge of Pegasus Airlines. He is also the person in continuous relation with our professional team regarding PE investments and operations.
Is the family culture still strong in the family office?
We now have a lot more non-family experts on board than we did six years ago. They’re all contributing to the culture, and we are all very aligned with the family. The family rarely refuses an investment we’ve proposed. They haven’t refused any so far.
How does Esas work and what were your marked successes?
Esas’ main objective is to create good companies. To achieve this, we buy companies that have grown in the past and still have the potential to grow in the future. Obviously, we look in detail at how and if we can use our know-how and experiences to help. We conduct very detailed commercial due diligence in the acquisition process, and we try to understand the industry and the company in depth. Our investment committee consists purely of non-family professionals; those companies that pass through will receive investment, as long as we have the calculations and strategic plan in place.
We’ve had many success stories. We acquired Pegasus Airlines in 2005, and they have become the second largest airline in Turkey. We also helped build up the largest cinema brand here in Turkey – now also the largest in Africa, Middle East, and Eastern Europe in fact. We exit the companies at the right time for us and the right time for them, i.e. when returns and are right, and we want to create space for new owners.
What strategic alliances do you depend on as a family office?
Obviously, we work very closely with investment banks, consultants, lawyers and auditors during the buying process, after an acquisition and when we sell again. We know exactly what we are looking for, which is why we prefer strategic alliance partners that understand us and our way of doing business. Also, we know how to work with other parties, and we like the co-investing format. We co-invest with people that share our ethical values and our vision for creating good companies.
What is your advice to families who want to set up their family office?
A family office should have a family constitution to start with. It should also have an investment vision specified: which asset classes, what amount of capital, the expectations of the returns and the investment principles. The next step is to establish dedicated teams and incentivise them appropriately. That’s crucial. Finally, the right performance criteria and communication platform should be in place between the family and the team. This is to allow the exchange of information and allow family members to ask for information and judge the performance of the team.
When you establish a family office, you have to run it like a professional organisation – unless the shareholder wants to run the whole business by himself. But if you want to grow it, then it is an entrepreneurial journey like any business.
Is the family office an effective way to include the next generation of the family?
There are examples of families who have managed and handed over their family offices for hundreds of years. It became their main business and allowed them to include their next generation, so yes it is a good way to ensure continuity!
What does the family offices landscape look like in Turkey?
Esas is the most organised family office in Turkey as we were the first to start investing in different asset classes with the right team structures. Esas is a very dynamic organisation as it is continuously trying to re-define itself. We are now entering our third phase. Of course, there are other well-organised offices in Turkey and they are evolving just as we are.
What does the future hold for Esas?
Esas will continue to create good companies and value for its shareholders. Esas has now a very strong track record of realizing success stories such as Pegasus Airlines, Mars Cinemas, Peyman, ALC, Renty, and Promed. We’re planning a multi-family office structure but not necessarily with other family office partners. Our next phase will involve other investors in our private equity business model. We’re working on it at the moment and are hoping to launch next year.
Tharawat Magazine, Issue 30, 2016