What Are Mergers & Acquisitions (M&A):

The process of integrating two or more businesses or assets into one entity is known in the business and financial worlds as “mergers and acquisitions” (M&A).

Mergers: When two enterprises with nearly comparable size and power combine to form a single, new company. The aim is to achieve synergies that raise the value of the combined firm, such as lowering expenses, greater market share, etc.

Acquisitions: An acquisition is the purchase of another company by the acquiring company (also referred to as the buyer). The acquisition company may make the target company a subsidiary or incorporate it into its operations. Acquisitions can be friendly, in which case both parties’ consent to the arrangement, or hostile, in which case the company being acquired objects to the takeover.

Deals involving mergers and acquisitions are frequently motivated by a variety of strategic goals, such as increasing market share, expanding the range of product or service offerings, entering new markets, attaining economies of scale, or acquiring access to the latest technology or intellectual property.

The M&A process entails thorough financial and legal due diligence, contract negotiations, obtaining regulatory approvals, and carefully weighing the rewards and risks. The impact of M&A upon customers, employees, shareholders, and the competitive dynamics of a sector can be significant.

What Should Companies Pay Attention When Engaging in Mergers & Acquisitions:

When engaging in mergers and acquisitions (M&A), businesses should carefully consider several important elements to ensure the transaction’s success and the future viability of the merged firm. Here are some essential factors to keep in mind:

Strategic Alignment: Ensure that the M&A is in accordance with the organization’s broad strategic goals and objectives. In terms of market expansion, product/service synergies, cost reductions, or other strategic benefits, it should make sense.

Due Diligence: Do in-depth research of the target company. This includes a thorough assessment of its legal requirements, potential risks, customer contracts, assets, and liabilities. Identify any underlying problems that might compromise the target’s integration or value.

Integration Planning: Plan the two companies’ integration thoroughly by creating a precise plan for integration. Organizational structure, technological systems, culture integration, and personnel retention should all be a part of this plan.

Legal and Regulatory Compliance: Understand and abide all legal and regulatory obligations, such as antitrust laws, regulations unique to industries, and international laws if the target conducts business internationally.

Financial Considerations: Evaluate the deal’s financial aspects, including the valuation, financing possibilities, and the effect on the balance sheet and cash flow of the company. Make sure the agreement gives a good return on investment and is financially stable.

Risk management involves recognizing and mitigating potential dangers related to a merger or acquisition. This encompasses dangers related to law, money, operations, and reputation. Having backup plans is a good idea.

Post-Merger Evaluation: Set key performance indicators, or KPIs, to gauge the success of the integration throughout the post-merger evaluation. To guarantee that the merger is successful, constantly assess your progress and make any necessary improvements.

Legal and Contractual Agreements: Review and revise agreements with vendors, clients, and other partners as appropriate to consider the M&A’s developments.

Prepare a crisis management strategy if unforeseen difficulties or crises develop during or after the merger.

Timing: Time management is crucial. To minimize interference with business operations and customer relationships, be careful when making the announcement and during the integration process.

Mergers & Acquisitions in Turkey:

Particularly for foreign investors, Turkey offers a lot of options. Turkey has carried out several measures in the ten years prior to enhance the environment for international businesses. Despite the global crisis, total foreign direct investment in Turkey has been increasing year for year. When it comes to M&A deals, international investors are especially interested in Turkey’s financial services, leasing, and energy industries. Every country has its own set of regulations governing mergers and acquisitions. According to the applicable Turkish codes, how M&A activities are carried out in Turkey is specified. One Turkish statute that governs M&A activity is the Turkish Commercial Code (“TCC”). Additional regulations that govern M&A activity include Turkish tax laws, the Law on the Protection of the Competition, and capital market laws.

It is essential for both buyers and sellers to abide by these laws and regulations when engaging in M&A activity in Turkey. To ensure compliance and manage the complexities of the process, legal counsel with experience in Turkish M&A regulations is frequently required. Additional rules and procedures can be applicable depending on the specific transaction. In some circumstances, it may also be necessary to interact with regulatory bodies like the Capital Markets Board and the Competition Board to get the necessary approvals.

 

Acquisition-related Activities and Turkish Capital Market Regulation:

The financial statements of the merging corporations, which will form the basis of the merger proceedings, need to be generated in accordance with Capital Markets Board accounting standards and must undergo special independent audits under the guidelines established by Capital Markets Board for independent audits. The special independent audits won’t be necessary if the financial statements that will serve as the basis for the merger have already undergone independent audits in accordance with Capital Markets Board requirements. An expert institution’s report must be created based on the financial statements’ data to ascertain the value of the companies’ assets. Depending on the company type, specific transactions and documentation pertaining to the M&A transactions that have been indicated in the Communiqué must be reported on the Board’s or companies’ website or on the public disclosure platform.

M&A Activities under Turkish Competition Legislation:

Certain M&A activity requires the Competition Board’s approval in accordance with Turkish law. Within this structure, a Communiqué regarding M&A transactions that require the Competition Board’s permission was approved in 2010, and it remains in effect today after receiving a few modifications in 2012 and 2015.

M&A activities are governed by Article 7 of the Competition Law, which also allows the Competition Board the power to determine through communiqués which M&A operations must be notified in order to be legally valid. In Turkey, the Merger Communiqué serves as the main legal tool for evaluating merger-related issues. The types of mergers and acquisitions that must be reviewed and approved by the Competition Board are outlined in the Merger Communiqué.

Acquisition-related Activities According Turkish Commercial Code Regulation:

Before the merger, there should be at least two commercial companies. The rights and liabilities of at least one commercial firm will be transferred to another commercial company. The partners of a firm that is dissolved or transferred become the partners of the new company. In case a new company is established as a result of the transfer, at least one company will be created, and in the event that an acquisition occurs, at least two companies will come into existence. All of the businesses, assets, rights, and obligations of the dissolved company or companies will be transferred to the transferee or to the newly formed enterprise as a whole. At least two commercial enterprises will merge into just one commercial enterprise.

The Turkish Commercial Code, which establishes the legal basis for many aspects of business transactions, including mergers and acquisitions, governs mergers and acquisitions (M&A) in Turkey.

CONCLUSION:

It’s essential to keep in mind that depending on the structure of the transaction, the sorts of companies involved, and other circumstances, specific regulations and procedures for M&A transactions may vary. It is therefore essential to seek legal advice and work with financial experts who are familiar with Turkish Commercial Law and can offer advice tailored to your M&A transaction such as us.