Introduction
Mergers and acquisitions in Turkey have played a significant role in shaping the country’s corporate and investment landscape over the past two decades. As a regional hub connecting Europe, Asia, and the Middle East, Turkey attracts both strategic investors and private equity funds seeking growth opportunities across sectors such as energy, finance, manufacturing, technology, healthcare, and infrastructure.
For foreign investors, entering the Turkish market through mergers or acquisitions often presents a more efficient route than establishing new entities. However, M&A transactions in Turkey are legally complex and require careful navigation of corporate law, competition law, capital markets regulations, tax rules, and sector-specific approvals.
This article provides a comprehensive overview of mergers and acquisitions in Turkey, including transaction structures, legal process, regulatory approvals, due diligence practices, and key risk considerations.
1. Legal Framework Governing M&A Transactions
Mergers and acquisitions in Turkey are primarily governed by:
- Turkish Commercial Code (TCC) No. 6102
- Capital Markets Law (for public companies)
- Competition Law No. 4054
- Turkish Code of Obligations
- Sector-specific legislation (banking, energy, insurance, telecom, etc.)
The Turkish Commercial Code provides the fundamental corporate law framework for mergers, demergers, and share transfers.
Competition Law regulates merger control and antitrust clearance.
For publicly listed companies, additional rules issued by the Capital Markets Board (CMB) apply.
2. Types of M&A Transactions in Turkey
M&A transactions in Turkey typically take one of the following forms:
1️⃣ Share Purchase (Share Deal)
The most common structure.
- Investor acquires shares of the target company.
- Legal entity continues to exist.
- All assets and liabilities remain within the company.
Advantages:
- Simpler structure.
- No need to individually transfer contracts.
- Business continuity preserved.
Risks:
- Buyer assumes hidden liabilities.
2️⃣ Asset Purchase (Asset Deal)
Investor acquires specific assets and liabilities.
Advantages:
- Selective transfer of assets.
- Liability exposure can be limited.
Disadvantages:
- Each asset may require separate transfer procedure.
- Contracts may require counterparty consent.
- Employee transfer rules apply.
3️⃣ Statutory Merger
Regulated directly under Turkish Commercial Code.
Two forms:
- Merger by acquisition (one company absorbs another)
- Merger by formation of a new company
Merger requires:
- Board resolutions
- Merger agreement
- Expert report (in certain cases)
- General assembly approval
- Registration at trade registry
3. Pre-Transaction Phase
The M&A process in Turkey usually begins with:
- Non-Disclosure Agreement (NDA)
- Letter of Intent (LOI) or Term Sheet
- Preliminary negotiations
Confidentiality is critical at early stages.
The term sheet outlines:
- Purchase price structure
- Payment mechanics
- Timeline
- Exclusivity provisions
4. Due Diligence Process
Due diligence is a core component of mergers and acquisitions in Turkey.
Its purpose is to:
- Identify legal risks
- Assess liabilities
- Evaluate compliance status
- Support valuation adjustments
Due diligence may cover:
A. Corporate Due Diligence
- Articles of association
- Shareholding structure
- Board resolutions
- Capital structure
B. Financial Due Diligence
- Financial statements
- Debt structure
- Off-balance sheet liabilities
- Tax exposure
C. Legal Due Diligence
- Contracts
- Ongoing litigation
- Employment agreements
- Intellectual property
- Regulatory permits
D. Regulatory Compliance
- Competition law issues
- Environmental compliance
- Data protection compliance (KVKK)
Findings often impact:
- Purchase price
- Representations and warranties
- Indemnity clauses
5. Competition Law Approval
Under Turkish Competition Law:
If turnover thresholds are exceeded, the transaction must be notified to the Turkish Competition Authority.
Failure to notify may result in:
- Administrative fines
- Invalid transaction risk
Merger control review examines:
- Market concentration
- Dominant position risks
- Competitive effects
Approval is generally required before closing.
6. Signing and Closing Process
M&A transactions are typically divided into:
Signing
Parties sign Share Purchase Agreement (SPA).
Closing
Transfer of shares and payment occur after:
- Regulatory approvals
- Condition precedent fulfillment
Conditions precedent may include:
- Competition clearance
- Sectoral regulatory approvals
- Board or shareholder approvals
7. Representations and Warranties
The Share Purchase Agreement usually includes:
- Corporate authority representations
- Financial accuracy warranties
- Tax compliance warranties
- Litigation disclosures
- Regulatory compliance statements
Indemnification clauses protect buyer against undisclosed risks.
8. Sector-Specific Approvals
Certain industries require additional approvals:
- Banking (Banking Regulation and Supervision Agency – BRSA)
- Energy (Energy Market Regulatory Authority – EMRA)
- Insurance
- Telecommunications
- Media
Failure to obtain required approvals may invalidate transaction.
9. Public Company Acquisitions
For publicly traded companies:
- Mandatory tender offer rules may apply.
- CMB regulations govern disclosure obligations.
- Minority shareholder protection mechanisms apply.
Acquisition of control triggers mandatory public offer to minority shareholders.
10. Tax Considerations
M&A transactions involve tax implications such as:
- Share transfer tax (generally limited)
- VAT implications in asset deals
- Corporate income tax
- Stamp tax
Certain mergers may benefit from tax-neutral restructuring provisions under Corporate Tax Law.
Proper structuring is critical to minimize tax burden.
11. Post-Closing Integration
After closing, investors must address:
- Corporate restructuring
- Management integration
- Employment transition
- Contract harmonization
- IT system integration
Post-merger integration is often more complex than the legal transaction itself.
12. Dispute Resolution
Disputes arising from M&A transactions may involve:
- Breach of warranty claims
- Earn-out disputes
- Indemnity enforcement
- Non-compete violations
Many cross-border transactions prefer arbitration under:
- ICC
- ISTAC
- Other international arbitration institutions
13. Common Risks in Turkish M&A
Foreign investors should consider:
- Currency volatility
- Regulatory unpredictability
- Tax audits
- Hidden liabilities
- Employment law risks
- Environmental compliance exposure
Thorough due diligence is the primary risk mitigation tool.
14. Strategic Advantages of Turkish M&A Market
Despite risks, Turkey offers:
- Large domestic market
- Young workforce
- Strong manufacturing base
- Strategic geographic location
- Liberal foreign investment regime
Foreign investors enjoy equal treatment under Turkish Foreign Direct Investment Law.
Conclusion
Mergers and acquisitions in Turkey provide significant strategic opportunities for both domestic and international investors. However, successful execution requires careful legal structuring, comprehensive due diligence, regulatory compliance, and strategic planning.
From transaction structuring to competition law approval and post-closing integration, each stage presents distinct legal considerations. With proper legal guidance and risk assessment, M&A transactions in Turkey can serve as powerful tools for market entry, expansion, and long-term growth.
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