What is the relationship of "Baykar" with Italy? And why is Greece complaining to the European Union about the increasing Turkish influence within European defense industries?
This part requires some contemplation and calm to understand an unknown aspect of Turkish defense industries... An aspect different from the videos of drones and news of military deals. It is an economic and commercial side that gives us a deeper understanding of the nature of this industry, revealing details that often do not receive attention.
In 2022, Turkey's Presidency of Defense Industries (SSB) imposed a requirement on any large company obtaining a defense project to allocate at least 21% of the contract share to small and medium-sized enterprises. These companies in Turkey are called "KOBİ" (KOBİ), equivalent to small and medium enterprises (SMEs) in English. This was an important step to activate the role of those companies in the industrial sector, and I previously wrote about the significance of this category of companies, and why it is considered the real key to developing defense industries.
At the same time, there is another mandatory law requiring companies to allocate a minimum of 2% of the value of defense contracts to localize research and development activities. This was one of the reasons that enabled the Turkish Aerospace Industries (TAI) to implement more than 125 localization programs, and it is currently working on 300 new programs in this field. This provides nearly one billion dollars annually that would have exited the country as imports.
Stay with me, as we have not yet reached the core of the subject, but we need this explanation first.
The Turkish Aerospace Industries (TAI) aims to produce 1,500 aircraft of different types — including drones, training aircraft, and fighter jets — by the year 2034. Among these aircraft are 500 "Kaan" fighters, 350 helicopters of the "Atak" and "Gökbay" types, in addition to 600 drones of the "Akinci" and "Aksungur" types.
As for "ASELSAN", it achieved a growth rate of 13% and an increase in operating profit (EBITDA) of 25% in 2024. "Baykar" is seeking to expand its production lines to meet the demands from 36 countries, and has raised the local supply ratio of its products from 38% in 2008 to over 70% in 2020.
Major projects like the "MİLGEM" project for warships rely up to about 65% on local suppliers, of which about 48% are small and medium enterprises.
All this data indicates a great ambition, but the current capabilities do not quite match the size of this ambition. Here, the solution appears in acquisitions, as this ambition, with an increase in production capacity, despite its importance, may turn into a major problem. I had previously addressed this matter when discussing South Africa and how increased production with weak demand led to the complete collapse of its defense industries.
In Turkey, this ambition requires precise coordination in supply chains, reduction of administrative and logistical costs, along with achieving financial stability. So who can achieve this equation?
Exactly, small and medium enterprises. They possess a greater ability to obtain financing quickly, already have existing markets they work in, and have greater flexibility in movement and development compared to major companies like TAI, which has thousands of employees and complex administrative structures with a long decision-making chain.
For example, in 2024, Baykar acquired the Italian company Piaggio, one of the oldest aviation companies in Italy. Thanks to this acquisition, "Baykar" was able to manufacture the products of the Italian company within its factories in Turkey, while at the same time, this deal became an opportunity for the company to overcome obstacles related to tariffs and international trade restrictions. This acquisition also helped it access European supply chains through an already existing company operating according to NATO and EU standards.
In 2023, the Turkish company SYS acquired the British company AEI Systems Ltd, a company specialized in producing medium-caliber cannons. The Turkish company obtained 80% of the shares of the British company, valued at about one billion Turkish lira at that time, enabling a distribution of production and development activities between Turkey and the UK. Thus, new markets opened for the Turkish company to enter through the British company, along with achieving a balanced distribution of risks and production lines simultaneously.
In the same year, 2023, the Turkish company Nurol acquired the German company IndustrieKeramik Hochrhein - IKH, which specializes in manufacturing ceramic materials used in armored vehicles and tanks. This acquisition expanded the activities of the Turkish Nurol company in the field of ballistic ceramics, giving it greater control over supply chains both within Turkey and in European markets.
As for this year, the Turkish company ARCA Savunma acquired the Italian company Esplodenti Sabino S.p.A, which operates in munitions and explosives disposal services. This company is important for both NATO and the EU, and has ongoing contracts with the Italian Ministry of Defense. Reports indicate that the Turkish company has plans to expand the activities of the Italian company to include missile and artillery ammunition fields, thus entering the European market through the gateway of this company.
Earlier, the Turkish company Sarsılmaz acquired the Italian company Vincenzo Bernardelli, which specializes in the production of small arms. The Turkish company moved the production lines to Turkey while maintaining the Italian brand, but thanks to this acquisition, it was able to flood the European market with less costly and higher quality products at the same time.
This month, ASSAN announced its acquisition of the South African company Dynaflow Technologies, which specializes in manufacturing fuses for munitions. This acquisition aims to support the Turkish company's plan to expand its capabilities in research and development and to combine its expertise with the technical capabilities of the South African company, while also opening new markets that serve the interests of both companies, both within Turkey and outside.
These acquisition operations are not limited to foreign companies only, but also include deals within Turkey itself.
"Sarsılmaz" acquired the company Yavaşçalar Av Spor Malzemeleri to expand its production scope and enhance horizontal control over the local market. After that, in 2024, the same company acquired the Best Group, a company specialized in manufacturing remote control towers, thus entering for the first time the field of ground and maritime systems.
Finally, in 2024, the Nurol Holding group acquired the stake of the British company BAE Systems in the Turkish company FNSS, a leading company in the development and production of armored vehicles. This acquisition was not of a small or medium-sized company, but it represents an important strategic acquisition for Nurol, as it allowed the company to dominate the market and become the sole owner of FNSS, enabling it to develop the localization process of the intellectual property of a Turkish product considered one of the most important in the field of defense industries.
The aspect that we often overlook in this wave of acquisitions is that Turkey is attempting to shift from being just a supplier of components to the "engineer of the architecture" responsible for the entire chain.
That is, the goal is no longer limited to manufacturing a part and selling it, but to be the one designing the production network itself, determining who enters the market, who exits it, who persists, and who disappears. When a Turkish company buys a munitions factory in Italy, or a ballistic ceramics manufacturing facility in Germany, or a fuse manufacturing company in South Africa, it is not just opening a new market, but creating a situation of mutual dependence.
Europe needs the technical capabilities of the companies that have come under Turkish ownership, and Turkey, in turn, needs the European market to expand its production size and enhance its competitiveness.
Are these acquisitions a positive thing that benefits the industry, or could they harm it in the long run?
It is a question that has seen differing opinions among experts. These operations have numerous benefits, including opening new markets, and controlling supply chains that I previously mentioned as a fundamental part of the very concept of national security. These acquisitions also contribute to reducing dependence on imports and opening more flexible and less restrictive foreign markets, especially in the European market where Turkey is experiencing accelerated expansion to the extent that Greece and Greek Cyprus frequently complain to the European Union about the increasing influence of Turkish defense industries within the continent.
But at the same time, there are serious downsides to acquisition operations in general, the most prominent of which is that they may lead to monopoly, when a limited number of companies dominate the entire market and industry.
A report on the Turkish aviation and defense sector stated that this sector in Turkey is organized like an industrial pyramid, with a broad base consisting of a large number of small suppliers, while its peak includes a limited number of major companies. For this reason, every acquisition needs to reset this pyramid, because the most important part of it is medium-sized companies, which tend to decline with increased acquisition operations, weakening flexibility and innovation within the industrial system as a whole.
Additionally, acquisition results in the companies subjected to it losing part of their flexibility and innovative capacity, as they often transform from an independent competitive entity in the market to a department within the parent large company.
Some European reports indicate that Turkish companies' acquisitions of their counterparts within the European Union enable those companies to gain European financing, which creates unequal competition for other European companies, raising concerns among some countries, led by Greece.
There is another negativity that carries with it a degree of positivity, which is that transferring part of the industrial and production capabilities abroad may cause harm to the national industry in terms of job loss and local expertise, but on the other hand achieves an important benefit in risk distribution, which is a very important issue in the sensitive defense industry.
Here arises an extremely critical question:
In the event of a political crisis between Turkey and the European Union, who will have the upper hand? Who will possess the ability to pressure the other?
Can Turkey use supply chains as a soft political weapon? Or could these companies themselves become pressure tools within the Turkish system to mitigate any potential clash with Europe?
Because it is a complex network of interests, part of which represents a source of strength, while another part might turn into a point of weakness if there is no conscious industrial policy that establishes clear rules of play and protects the medium-sized companies from dissolving into giant entities.
In my opinion, there is an escalating wave of Turkish acquisitions, and it cannot be viewed simply as isolated news about deals that are not connected to each other, but rather as part of a systematic attempt to transition Turkish defense industries from the pursuit of catching up to reshaping the map itself.
Turkey seeks to be at the heart of European supply chains, refusing to play a marginal role, using a mix of small and medium enterprises, acquisitions, and localization policies to build a firm position within a global defense system undergoing significant transformation.
Although this policy carries some downsides, what will make the difference in the end is how Turkey deals with acquisitions:
Will it treat them as a long-term strategic weapon managed within a clear framework that maintains diversity and innovation?
Or will it see them as a shortcut to inflate export and profit numbers at the expense of the strength of its defense system in the long run?
From my perspective, the real battle is not with Greece in its repeated complaints to the European Union, but within Ankara itself, in the way the Turkish defense industrial pyramid is managed, and in its ability to protect the middle class of companies that form the solid foundation of this industry in the first place.
This is an AI-generated English translation. The original text is in العربية
PhD Researcher in Defense Contracting and Cooperation Policies