Buying a Company in Turkey

yazarı lawyerfbc

açık Kasım 28, 2025

Introduction

Foreign direct investment (FDI) has increasingly positioned Turkey as a regional hub for strategic mergers and acquisitions (M&A). With its dynamic economy, diversified industrial base, and advantageous geographical location connecting Europe, Asia, and the Middle East, Turkey continues to attract investors seeking to enter new markets or expand operations. For foreign investors, purchasing an existing Turkish company is often the most efficient route to establish a presence — but this process requires a detailed understanding of Turkish corporate, commercial, and regulatory law.

This article provides an in-depth legal analysis of company acquisitions in Turkey, addressing the regulatory framework, due diligence requirements, transaction structures, foreign ownership restrictions, competition clearance, taxation, and post-acquisition obligations. The aim is to offer a practical legal guide for international investors considering an acquisition in Turkey.

1. Legal Framework Governing M&A Transactions in Turkey

1.1. Key Legislation

The main legal sources governing mergers and acquisitions in Turkey include:

Turkish Commercial Code (TCC) No. 6102 – regulates corporate structures, mergers, demergers, and share transfers.
Turkish Code of Obligations (TCO) No. 6098 – governs contractual principles, representations, and liabilities.
Capital Markets Law (CML) No. 6362 – applies to publicly listed companies and securities transactions.
Foreign Direct Investment Law (FDIL) No. 4875 – ensures equal treatment for foreign investors.
Competition Law No. 4054 – requires merger clearance in certain cases to prevent market concentration.
Labor Law No. 4857 – regulates transfer of employees and labor continuity during ownership change.

Each acquisition type (share transfer, asset purchase, or merger) triggers different statutory requirements under these frameworks.

2. Forms of Company Acquisition

2.1. Share Purchase

A share purchase involves acquiring the shares of an existing company (Limited or Joint Stock). The buyer becomes the new shareholder and assumes control of the entity, including all rights, liabilities, and contractual obligations.

Advantages: Simplified transition; continuity of contracts, licenses, and employees.
Disadvantages: The buyer inherits all hidden liabilities unless mitigated through due diligence or warranties.

For Joint Stock Companies (A.Ş.), share transfers are usually unrestricted unless limited by the articles of association. For Limited Liability Companies (Ltd. Şti.), transfer requires a notarized share transfer agreement and registration in the Trade Registry.

2.2. Asset Purchase

In an asset purchase, the buyer acquires specific assets (such as equipment, intellectual property, or a business division) rather than the entire company.

Advantages: The buyer avoids historical liabilities.
Disadvantages: Requires individual assignment of each asset, contract, and license.

Asset transfers are subject to VAT, title deed fees (for real estate), and other transaction costs.

2.3. Merger and Demerger

Under the TCC, two or more companies may merge through absorption or formation of a new company. Alternatively, a demerger can divide one company’s assets among new or existing entities.
These corporate reorganizations require detailed merger agreements, board resolutions, auditor opinions, and Trade Registry filings.

3. Preliminary Steps for Foreign Investors

3.1. Establishing a Legal Entity or Representation

Foreign investors can purchase shares either directly as individuals or through a foreign legal entity. Many prefer to establish a Turkish subsidiary to handle transactions and operations, benefiting from domestic tax treatment and simplified management.

3.2. Power of Attorney (PoA)

If the investor is abroad, they must issue a notarized and apostilled Power of Attorney authorizing a local lawyer to conduct due diligence, sign contracts, and complete Trade Registry filings.

3.3. Compliance with Foreign Investment Law

Under the FDIL, foreign investors enjoy national treatment and can freely acquire shares unless restricted by sector-specific regulations (e.g., defense, broadcasting, or energy).
However, acquisitions involving real estate or strategic sectors may require prior approval from relevant ministries.

4. Legal Due Diligence

Before entering an M&A transaction, a comprehensive legal due diligence (LDD) process is critical to assess potential risks.

4.1. Scope of Due Diligence

Key areas typically reviewed include:

Corporate records: Articles of association, share ledgers, registry extracts, general assembly resolutions.
Contracts: Supplier, customer, lease, and loan agreements.
Litigation: Pending or threatened lawsuits, administrative sanctions.
Employment: Labor contracts, social security payments, union relations.
Intellectual Property: Trademark, patent, software registrations.
Tax and Accounting: Tax compliance, liabilities, audits.
Environmental and Regulatory: Sector-specific permits or licenses.

4.2. Confidentiality and Data Room Access

The seller often provides confidential information under a Non-Disclosure Agreement (NDA). A virtual data room may be established to facilitate secure document sharing.

4.3. Due Diligence Outcome

Findings from due diligence directly affect valuation, negotiation of warranties, and price adjustments. Investors may request indemnity provisions or escrow mechanisms to mitigate identified risks.

5. Negotiation and Drafting of Transaction Documents

The M&A process culminates in the execution of detailed legal agreements.

5.1. Letter of Intent (LOI)

The LOI outlines preliminary terms and demonstrates the investor’s serious intent. It may include exclusivity periods, confidentiality clauses, and key deal terms.

5.2. Share Purchase Agreement (SPA)

The SPA is the central binding document defining the transfer mechanics, price, warranties, and post-closing obligations. Essential clauses include:

Representations and warranties
Indemnification provisions
Conditions precedent (e.g., regulatory approvals)
Governing law and dispute resolution

In cross-border deals, parties often choose Turkish law and Istanbul Arbitration Centre (ISTAC) or ICC arbitration for disputes.

5.3. Ancillary Documents

6. Regulatory Approvals and Notifications

6.1. Competition Authority Clearance

Under Law No. 4054, mergers and acquisitions that significantly affect the market require prior notification to the Turkish Competition Authority (TCA) if turnover thresholds are exceeded.
The TCA evaluates whether the transaction restricts competition or creates market dominance. Approval generally takes 30–45 days.

6.2. Sector-Specific Approvals

Certain industries—such as energy, banking, insurance, aviation, and telecommunications—are subject to regulatory supervision. Acquisitions in these sectors may require Energy Market Regulatory Authority (EMRA), Banking Regulation and Supervision Agency (BRSA), or Information and Communication Technologies Authority (ICTA) approvals.

6.3. Foreign Investment Reporting

Post-acquisition, foreign investors must submit information on ownership and capital structure changes to the Ministry of Industry and Technology’s General Directorate of Incentive Implementation and Foreign Investment (GDII) through the E-Tuys system.

7. Taxation in M&A Transactions

7.1. Corporate Income Tax

The corporate tax rate in Turkey is currently 25% (2025). When a company sells shares, the capital gain is taxable unless exempt (e.g., under the participation exemption for holding companies).

7.2. Value Added Tax (VAT)

Share transfers are VAT-exempt.
Asset sales generally trigger 20% VAT, unless exempted.
Real estate transfers incur title deed fees (each party pays 2%).

7.3. Withholding Tax

Dividends distributed to foreign shareholders are subject to 10% withholding tax, which can be reduced under double taxation treaties (DTTs).

7.4. Tax Due Diligence

Identifying hidden tax liabilities is vital. Investors often require tax indemnity clauses or escrow accounts to safeguard against post-closing assessments.

8. Employment and Labor Law Considerations

8.1. Transfer of Employees

Under Article 6 of Labor Law No. 4857, when a workplace is transferred, employees’ rights and obligations automatically transfer to the new employer without interruption.

8.2. Collective Agreements and Unions

If a collective bargaining agreement exists, it continues to bind the new employer until its expiration date.

8.3. Termination Protections

Any termination resulting solely from a change of ownership is invalid unless there is a legitimate operational reason. This ensures protection of employees during ownership transitions.

9. Intellectual Property and Technology Assets

9.1. Transfer and Licensing

Acquisitions involving technology companies, software startups, or patent-based businesses require special attention to IP ownership.
All IP rights must be properly registered in the Turkish Patent and Trademark Office (TPTO) and transferred via notarized assignment agreements.

9.2. Data Protection Compliance

Under the Personal Data Protection Law (KVKK), both the buyer and the target must ensure lawful transfer of personal data.
If the target processes large volumes of customer data, the acquisition may trigger mandatory data controller notifications to the Personal Data Protection Authority.

10. Real Estate and Environmental Issues

If the company owns real estate, title deeds, zoning permits, and environmental impact assessments (EIA) should be examined.
Foreign ownership of land may be subject to restrictions, particularly in military zones or strategic areas, requiring Ministry of Defense or Governorate approval.

11. Financing and Payment Mechanisms

11.1. Payment Structures

Common structures include:

Lump-sum payment at closing.
Deferred payment or earn-out mechanisms based on performance.
Escrow accounts to secure warranty obligations.

11.2. Foreign Currency Payments

Payments can be made in USD, EUR, or TRY. Turkish exchange regulations allow cross-border remittance of purchase prices, provided bank documentation and tax compliance are satisfied.

12. Dispute Resolution

12.1. Choice of Law and Jurisdiction

Parties may select Turkish law, English law, or Swiss law as governing law depending on transaction complexity.
Disputes can be resolved before:

Istanbul Arbitration Centre (ISTAC)
ICC Arbitration (Paris or London)
Turkish Commercial Courts (for domestic deals)

12.2. Arbitration Advantages

Arbitration ensures confidentiality, enforceability under the New York Convention, and neutral resolution for foreign investors.

13. Post-Closing Compliance

After closing, investors must:

Register share transfers with the Trade Registry.
Notify the Tax Office and Social Security Institution (SGK).
Update the MERSİS (Central Registration System).
File annual activity reports to the Ministry for statistical purposes.

Non-compliance with reporting obligations can lead to administrative fines.

14. Common Pitfalls and Practical Recommendations

14.1. Hidden Liabilities

Failure to conduct deep due diligence often leads to unforeseen tax or litigation risks. Always engage experienced Turkish counsel and auditors.

14.2. Overlooking Regulatory Thresholds

Neglecting competition filings or sector-specific approvals may invalidate the transaction.

14.3. Underestimating Cultural and Corporate Integration

Beyond legal compliance, integration with the Turkish workforce and business culture is essential for sustainable success.

14.4. Contractual Protections

Investors should insist on comprehensive warranties, indemnities, and non-compete clauses to protect post-acquisition value.

15. Recent Trends and Outlook

The Turkish M&A market continues to grow, particularly in:

Technology and fintech startups
Energy and renewable projects
Healthcare and pharmaceuticals
Logistics and infrastructure

Government incentives for foreign capital, energy transition, and digital transformation make Turkey an attractive acquisition destination.
Moreover, the Istanbul Finance Center (IFC) initiative aims to consolidate Turkey’s position as a regional investment hub by offering arbitration, tax, and financial advantages.

Conclusion

Buying a company in Turkey offers international investors a strategic entry into a robust and growing market. However, successful acquisitions depend on meticulous legal preparation, compliance with regulatory procedures, and expert local guidance.
By understanding the Turkish legal framework — including corporate, tax, labor, and competition law — investors can minimize risks and secure long-term profitability.

Engaging a specialized Turkish law firm experienced in M&A transactions is essential to navigate this process effectively and ensure that every stage, from due diligence to post-closing integration, aligns with both Turkish regulations and international best practices.

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