M&A in Turkey: Legal Due Diligence Tips for Foreign Buyers
Turkey has become a key market for cross-border mergers and acquisitions, especially for strategic investors and private equity funds looking for growth and regional expansion. A young population, dynamic domestic demand and a strategic location between Europe, Asia and the Middle East make Turkish targets particularly attractive.
However, for foreign buyers, a Turkish deal is never just about negotiating the purchase price and signing a Share Purchase Agreement (SPA). The outcome of the transaction depends heavily on how well legal due diligence is planned and executed under Turkish law. Proper due diligence helps you understand what you are really buying, where the main risks lie and how to structure your contractual protections before closing.
Below are practical, Turkey-focused legal due diligence tips to help foreign buyers navigate this process more safely and efficiently.
1. Start with the Legal and Regulatory Map
Before looking at documents, foreign buyers should first understand the basic legal environment in which the target operates. In Turkey, corporate and contractual relationships are shaped mainly by the commercial code, the obligations code, competition rules, data protection law and, where relevant, capital markets regulations.
In addition, many sectors (banking, insurance, payments, energy, telecoms, media, health, transportation, education and so on) are heavily regulated by specific authorities. Transactions in these industries may require prior approvals, post-closing notifications or strict fit-and-proper tests for shareholders and managers.
Practical tip: Ask Turkish counsel to prepare a short “regulatory map” identifying (i) which core laws apply to your deal, (ii) which regulators might be involved and (iii) which approvals or notifications are deal-critical. This early mapping will guide the scope of your due diligence and your transaction timeline.
2. Tailor the Due Diligence Scope to the Deal
Using a generic global questionnaire is rarely effective. Each Turkish target has its own risk profile, and local practice matters. A mid-sized, family-owned manufacturing company in Anatolia will not look like a regulated fintech in Istanbul.
You should therefore agree with your advisers on:
- Depth of review: Will you run a “red flag” review focusing only on material risks, or a full-scope review of all legal areas? Auction processes and tight competition often favour a red-flag approach, while founder-owned or distressed targets may justify deeper work.
- Priority topics: In many Turkish deals, recurrent pressure points include tax and social security practices, informally documented relationships with related parties, employment liabilities, real estate and zoning issues, and regulatory licences.
- Deliverables: For internal use, foreign buyers typically need an executive summary with clear risk ratings, followed by a detailed sectioned report that can be used in negotiations and drafting.
A tailored scope saves time, reduces noise and ensures you spend your budget on real risks instead of low-value document review.
3. Corporate Structure and Share Ownership
One of the first tasks in Turkish legal due diligence is to verify who actually owns the company you are acquiring and how the group is structured.
Key steps include:
- Reviewing the articles of association and all amendments.
- Checking the trade registry records and online registration system against the corporate documents.
- Examining the share ledger, share certificates (if issued) and resolutions on capital increases and decreases.
- Confirming that past share transfers were properly executed, notarised (where required) and registered.
In limited liability companies, share transfer formalities are strict and historical errors are common. In joint stock companies, the focus is usually on whether there are any registered share transfer restrictions or contractual commitments affecting the free transferability of shares.
If inconsistencies appear between the share ledger, registry and actual practice, you may face challenges in evidencing clean title to the shares. Corrective actions can sometimes be taken before closing, but they must be identified early.
4. Licences, Permits and Regulatory Compliance
Licences and permits are a critical value driver in many Turkish targets. Losing a licence post-closing or discovering it cannot be transferred under a new ownership structure can undermine the whole deal.
Legal due diligence should:
- Identify all regulatory licences, permits and authorisations held by the target (national, regional and municipal).
- Confirm they are valid, up to date and issued in the correct legal entity.
- Check whether they contain change-of-control, share transfer or shareholder approval requirements.
- Examine whether the target has ever been fined or investigated for regulatory breaches.
In some sectors, regulators will look not only at the company but also at its shareholders and directors. Foreign buyers should therefore understand early on what information they may be required to provide and how this aligns with their internal compliance policies.
5. Material Contracts and Change-of-Control Risks
Commercial contracts are the backbone of the target’s business. Losing or weakening key relationships following the acquisition can significantly affect deal value.
The due diligence should prioritise:
- Top customers and suppliers, especially those representing a large share of revenue or critical inputs.
- Distributors, agents and franchisees.
- Long-term service, outsourcing and logistics agreements.
- Financing agreements, guarantees and security documents.
- Joint venture, shareholder and partnership agreements.
For each contract, you should examine:
- Change-of-control clauses: Can the counterparty terminate or renegotiate if control over the target changes?
- Consent requirements: Is prior written consent required to transfer the contract or the business?
- Exclusivity and non-compete provisions: Could they restrict your ability to restructure or expand in Turkey?
- Penalty clauses and liquidated damages: Are they commercially acceptable? Are there cumulative penalty structures that could pose a disproportionate risk?
The findings here often translate directly into conditions precedent, specific indemnities or price adjustments in the SPA.
6. Employment, Social Security and Management Incentives
Employment law in Turkey is protective and heavily procedural. Missteps here can lead to reinstatement claims, substantial compensation and reputational exposure.
Key employment due diligence items include:
- Standard employment agreements for white-collar and blue-collar employees.
- Senior management agreements, side letters, bonus and incentive schemes.
- Compliance with mandatory benefits, working hours, overtime rules and leave entitlements.
- Use of “consultant” or “freelancer” arrangements that may in reality be disguised employment.
- Termination practices, severance payments and any mass lay-off history.
- Existence of trade unions, collective bargaining agreements or workplace representatives.
You should also compare HR documentation with payroll records and social security declarations. Gaps between what is reported to authorities and what is actually paid can signal hidden liabilities that must be factored into the valuation and warranty package.
7. Litigation, Administrative Proceedings and Investigations
No acquisition comes without some form of dispute history. In Turkey, many disputes are recorded electronically, but the most reliable information is usually a combination of system searches and local knowledge.
Your due diligence should:
- Obtain a full list of ongoing and threatened court and arbitration proceedings where the target is claimant or defendant.
- Review key case files and recent decisions in material disputes.
- Check for administrative investigations and fines (tax, customs, competition, regulatory, municipal).
- Identify enforcement and collection proceedings, including any seizures or liens.
The goal is not to litigate the case during due diligence, but to understand probability of success, potential exposure and the time horizon for resolution. Material disputes may justify escrow arrangements, price retention, specific indemnities or walk-away rights if certain thresholds are exceeded.
8. Real Estate, Zoning and Environmental Issues
Where the target owns or uses real estate (offices, factories, warehouses, stores), you should pay close attention to:
- Land registry extracts and historical ownership.
- Mortgages, easements, rights of way, usufruct rights and other encumbrances.
- Building permits, occupancy permits and zoning compliance.
- Long-term lease contracts, rent escalation provisions and termination rights.
Local practice sometimes relies on informally documented usage rights, family ownership structures or unregistered buildings. These issues can usually be managed if they are identified early and reflected in the deal structure and risk allocation.
9. Intellectual Property, Technology and Data Protection
For many modern businesses, value lies in their intellectual property and data. Legal due diligence should therefore cover:
- Registered trademarks, patents, industrial designs and domain names, and the chain of title for each.
- Ownership of software, know-how and trade secrets, including contracts with employees and third-party developers.
- Licence, franchising and technology transfer agreements.
- Compliance with data protection rules, especially in relation to customer, employee and supplier data.
- Use of cloud services and cross-border data transfers within the group.
Foreign buyers should compare the target’s local practices with their own global compliance standards. Aligning Turkish data protection compliance with group-wide policies may require investment and clear post-closing action plans.
10. Competition Law and Merger Control
Many cross-border acquisitions involving Turkish targets require merger control notification. The notification thresholds are based on turnovers, and even foreign-to-foreign deals can be caught where the parties have sufficient sales into Turkey.
From a due diligence perspective, buyers should:
- Confirm whether there is a filing obligation in Turkey and whether the transaction can be closed only after clearance.
- Check if the target has any history of competition investigations, dawn raids or fines.
- Review distribution, agency and pricing policies for vertical and horizontal restraints.
Merger control is not only a regulatory step; it also affects your timetable, long-stop date, risk allocation and pre-closing covenants. Gun-jumping risks (exercising control before clearance) should be taken seriously and managed carefully.
11. Turning Due Diligence Findings into Deal Protections
The real value of legal due diligence lies in how you use the results in the SPA and related documents. Typical tools include:
- Purchase price mechanisms: Adjust the price for net debt, working capital or specific liabilities discovered during the review.
- Conditions precedent: Require the seller to fix certain issues before closing (renew a licence, register a share transfer, obtain a consent, terminate a high-risk contract).
- Representations and warranties: Tailor the wording and scope according to the actual risk profile of the target. Where due diligence reveals weaknesses, you may need tighter language, longer survival periods or higher caps.
- Specific indemnities: Ring-fence clearly identified risks such as a tax audit, a major lawsuit or a zoning irregularity with targeted indemnity protection.
- Covenants between signing and closing: Protect the business by restricting unusual transactions, related-party dealings or changes in key contracts without your consent.
When structured properly, these instruments convert due diligence knowledge into concrete contractual protection.
12. Practical Takeaways for Foreign Buyers
To make the most of an acquisition in Turkey, foreign buyers should keep a few practical points in mind:
- Invest in strong Turkish counsel with hands-on transactional and regulatory experience.
- Treat local corporate and notarial formalities as essential, not optional.
- Be realistic about the documentation level of mid-sized Turkish companies, and distinguish truly deal-breaking gaps from issues that can be cured.
- Keep legal, financial and tax advisers in close communication so that findings in one stream are immediately reflected in the others.
- Start thinking about post-closing integration (HR, IT, compliance, licences) while due diligence is still ongoing, not after the deal is signed.
With a well-planned, locally grounded legal due diligence process, foreign buyers can significantly reduce uncertainty, negotiate a more balanced risk allocation and increase the likelihood that their Turkish acquisition will perform as expected in the years after closing.
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