on August 7, 2026

Introduction

A management buyout can create one of the most unusual dynamics in an M&A transaction: the people buying the company may also be the people who know more about it than anyone else.

In a conventional acquisition, an external buyer investigates the target through due diligence. In a management buyout (“MBO”), the acquiring group generally includes the target company’s existing CEO, executives or senior managers.

Management already knows the company’s customers, employees, contracts, financial condition and commercial weaknesses. At the same time, those managers may owe continuing duties to the target while negotiating an acquisition for their own economic benefit.

This creates a fundamental tension.

Management may simultaneously be:

an employee or director of the target, a source of information for the seller, a potential shareholder of the buyer and ultimately one of the persons benefiting economically from a lower acquisition price.

For this reason, management buyouts in Turkey require careful structuring under the Turkish Commercial Code No. 6102 (“TCC”), the Turkish Code of Obligations, competition legislation, employment law and, depending on the financing structure, rules concerning financial assistance and corporate benefit.

MBOs can nevertheless provide an effective succession and exit solution for founders, family-owned companies, private equity investors and corporate groups seeking to dispose of non-core businesses.

What Is a Management Buyout?

A management buyout occurs where members of the existing management team acquire all or a significant portion of the company they manage.

The acquisition may be financed through a combination of management capital, private equity investment, acquisition debt, seller financing and rollover equity.

A simplified structure may therefore look like:

Management + Financial Investor → Acquisition Vehicle → Target Company

The management team may contribute only a relatively small percentage of the total purchase price but receive a meaningful equity interest because of its importance to the future operation and growth of the business.

For example, a private equity fund may provide 80% of the equity required for the acquisition, management may provide 20%, and additional bank financing may fund part of the transaction price.

After closing, the private equity investor and management operate the business together according to a shareholders’ agreement.

Why Are Management Buyouts Used?

Management buyouts frequently arise when an existing owner wishes to exit but wants to preserve business continuity.

A founder approaching retirement may prefer to sell the company to executives who have worked in the business for many years rather than to an unknown competitor.

A private equity fund reaching the end of its investment period may consider a management-backed acquisition.

A corporate group may sell a subsidiary that is no longer strategically important while its existing management believes the business has strong independent prospects.

An MBO may therefore combine continuity with ownership change.

From the seller’s perspective, management already understands the company and may require less commercial familiarisation than an external investor.

From management’s perspective, the transaction provides an opportunity to convert years of operating experience into equity ownership.

Management Buyout Versus Management Buy-In

An MBO should be distinguished from a management buy-in (“MBI”).

In a management buyout, the acquiring managers already work for the target.

In a management buy-in, an external management team acquires the business and replaces or supplements existing management.

A transaction may also combine the two structures.

For example, the existing CEO and CFO may invest together with a private equity fund that introduces a new chairman and chief operating officer.

The distinction matters because existing managers have access to significantly more confidential information and may be subject to existing duties toward the target.

The Principal Legal Issue: Management Is on Both Sides of the Transaction

The most sensitive aspect of an MBO is the potential conflict between management’s existing duties and its personal interest as a buyer.

Suppose a CEO is also a board member.

As a director, that person may owe duties to the target company.

As a member of the acquiring consortium, the same person has an economic interest in acquiring the company at the lowest possible price.

The Turkish Commercial Code expressly requires board members and persons entrusted with management to perform their duties with the care of a prudent manager and to protect the company’s interests in accordance with the principle of good faith.

This means an executive cannot simply disregard his or her existing corporate responsibilities because a management buyout is being negotiated.

Board Member Conflict of Interest

TCC Article 393 provides an important rule concerning conflicts of interest.

A board member may not participate in deliberations concerning matters where the member’s personal interests outside the company conflict with the interests of the company. The relevant board member is required to disclose the conflict and comply with the prohibition. The reason for non-participation must also be recorded in the board decision.

The Code further provides for potential liability where a board member improperly participates in a conflicted decision and the company suffers loss.

This rule has obvious relevance to an MBO.

If a director is participating in the acquisition consortium, that director should not simply participate in target board deliberations concerning the management buyout as if no conflict exists.

The corporate decision-making process should be structured around the conflict from the beginning.

Independent Decision-Making

Where management is conflicted, the seller or target may establish an independent decision-making process.

Depending on the ownership and governance structure, transaction evaluation may be handled by non-conflicted directors, shareholders or an independent committee.

The objective is to ensure that persons negotiating on behalf of the target or seller are not economically aligned with the management buyer.

The process may include an independent valuation, financial adviser, separate legal counsel and documented board deliberations.

This can be especially important where the company has minority shareholders.

A transaction perceived as transferring control to management at an artificially low price can create significant shareholder disputes.

Transactions Between Directors and the Company

TCC Article 395 also contains restrictions concerning transactions between a board member and the company.

Under Article 395(1), a director may not enter into a transaction with the company on their own behalf or on behalf of another person without authorisation from the general assembly; the company may invoke invalidity in the circumstances specified by the provision.

Not every MBO automatically constitutes a direct transaction between a director and the target because the shares may be sold by existing shareholders rather than the company itself.

However, related arrangements may involve the target.

For example, management may negotiate new employment agreements, incentive arrangements, financing or other arrangements with the target in connection with the buyout.

These should be examined separately for conflict and approval requirements.

Management Non-Compete Duties

TCC Article 396 imposes a statutory non-compete obligation on directors, subject to general assembly permission.

A board member cannot, without the required permission, conduct transactions falling within the company’s business activity for themselves or another person or enter specified competing arrangements.

This issue may become important where an MBO process fails.

Suppose management forms an acquisition vehicle, obtains financing and negotiates with the owner, but the sale ultimately does not occur.

Management should not assume that information and relationships developed while working for the target can then be used freely to establish a competing business.

Contractual confidentiality, trade-secret and employment obligations may also continue to apply.

Information Asymmetry

One reason management may be an attractive buyer is also one of the reasons an MBO can become controversial.

Management knows the target better than ordinary third-party bidders.

Executives may know that:

A major customer is about to sign a significant contract;
An important regulatory approval is expected;
A valuable property is materially undervalued;
The company has developed a commercially promising new technology;
Reported profitability is temporarily depressed because of a one-off event.

If that information is not available to the seller or other shareholders, difficult questions may arise regarding valuation and disclosure.

A robust MBO process should therefore reduce the risk that management benefits improperly from information obtained through its existing position.

Seller Access to Information

It may seem unusual to discuss seller due diligence, but in an MBO the seller may need its own independent assessment of the business.

A founder who has delegated daily management for years may know less about the current financial and operational condition of the company than the managers trying to purchase it.

Independent financial review can therefore be important.

The seller may wish to examine:

Current trading;
Forecasts;
Customer pipeline;
Working capital;
Significant contracts;
Property valuations;
Pending transactions.

The objective is not necessarily to distrust management. It is to create a transaction in which the agreed price can be commercially justified.

Independent Valuation

Independent valuation can be particularly important where management is purchasing a company from:

A family;
An estate;
A company with minority shareholders;
A corporate group;
A financially distressed seller.

The valuation may use methodologies such as discounted cash flow, comparable-company multiples, precedent transactions or net asset value.

The appropriate methodology depends on the business.

A company owning substantial real estate may require separate valuation of those assets.

A technology business may be valued largely by future growth.

A management buyout should not rely solely on a price suggested by the acquiring management team.

Competitive Sale Process Versus Exclusive MBO

One way to test value is to expose the business to other potential buyers.

A competitive sale process may demonstrate whether the management offer reflects market value.

However, the seller may prefer an exclusive MBO where confidentiality, speed or continuity is particularly important.

For example, approaching competitors may alarm employees or customers.

There is therefore no requirement that every MBO be conducted through an auction.

The appropriate process depends on the ownership structure and the seller’s obligations.

Management Access to Confidential Information

Management will naturally have significant knowledge of the business.

However, that does not necessarily give the acquiring consortium unrestricted access to every confidential company document.

The seller should distinguish management’s ordinary access as executives from access provided specifically for the acquisition.

Where managers form a consortium with an external private equity investor, information should not automatically flow from the target to the investor.

A controlled virtual data room may still be appropriate.

External Financial Investors

Many management teams do not have sufficient capital to acquire a substantial company independently.

A private equity fund, family office or strategic financial investor may therefore sponsor the transaction.

The investor provides capital while management provides operational expertise.

This structure can be attractive because the investor acquires a business with a management team already capable of operating it on Day One.

However, the investor will generally require extensive governance rights and a clear exit mechanism.

Management Equity

Management equity is at the centre of an MBO.

The management team may invest its own money and receive ordinary shares.

Alternatively, the economic structure may distinguish between investor shares and management shares.

The transaction should establish:

Management’s initial ownership;
Funding obligation;
Voting rights;
Dividend rights;
Future dilution;
Exit participation.

The legal rights attached to the shares should be coordinated with the Turkish company’s articles of association and the shareholders’ agreement.

Management Must Have Genuine Economic Exposure

Private equity investors frequently want management to invest personally in the transaction.

This is commonly referred to as management rollover or management equity participation.

The commercial objective is alignment.

If management can obtain significant upside without investing or assuming any downside, incentives may not be fully aligned with investors.

The amount required from management depends on the transaction.

It may involve cash, rollover of existing shares or reinvestment of part of management’s sale proceeds.

Rollover Equity

Where managers already own shares in the target, they may sell only part of their interest.

For example, a manager may hold 10% of the target before the transaction.

Instead of receiving cash for the entire holding, the manager may reinvest part of the economic value into the acquisition structure.

This can reduce the buyer’s cash funding requirement and align the manager with the new investor.

Rollover arrangements should specify clearly which shares are sold, which economic value is reinvested and what rights attach to the new investment.

Tax consequences should also be assessed before implementation.

Sweet Equity and Management Incentives

In private equity transactions, management may receive economic upside that is disproportionate to the nominal amount invested.

International practice sometimes refers to this as sweet equity.

The concept is designed to reward management if the investor achieves a strong return.

For example, management’s economic participation may increase significantly once the investor has first recovered its investment and achieved an agreed minimum return.

The mechanism can be implemented through carefully structured share rights, options, contractual incentives or combinations of them.

It must nevertheless be adapted to Turkish corporate and tax law.

Simply copying a UK private equity management equity structure into a Turkish company may not produce the intended corporate consequences.

Ratchets

A management ratchet increases management’s economic participation if specified performance or investor-return thresholds are achieved.

For example, management may receive:

5% of exit proceeds at lower valuation levels,

but effectively participate at 10% if the investor achieves a specified internal rate of return.

These arrangements are highly commercial and require precise drafting.

The transaction documents should define:

Relevant exit;
Investor return;
Calculation methodology;
Treatment of new financing;
Partial disposals;
Management departures.

A complicated incentive formula should contain worked numerical examples.

Founder and Management Rollover

In family-business MBOs, both founder and management may remain invested.

For example:

A founder sells 80% and retains 20%.

Management acquires or receives 10%.

A private equity investor acquires the remaining 70%.

This creates a three-party ownership relationship after closing.

The shareholders’ agreement must address potentially different objectives.

The founder may prioritise legacy and dividends.

Management may prioritise operational freedom.

The investor may prioritise growth and exit within a defined investment period.

Acquisition Vehicle

An MBO is commonly implemented through a special-purpose acquisition vehicle.

Management and the financial sponsor invest in the acquisition company, which purchases the target shares.

This separates the acquisition funding from the operating target.

The vehicle may also serve as the level at which management equity and investor rights are structured.

Whether the acquisition vehicle should be Turkish or foreign requires tax, regulatory and financing analysis.

Financing the Management Buyout

MBO financing may combine several sources.

The management team may contribute equity, the financial sponsor may provide equity, banks may provide acquisition debt and the seller may agree to deferred consideration.

The economic model should consider not only the purchase price but also:

Existing target debt;
Transaction expenses;
Working capital;
Refinancing needs;
Post-closing investment.

A management team that uses every available resource to complete the acquisition may leave the company without sufficient liquidity to operate after closing.

Acquisition Debt

Bank financing may be raised at acquisition-vehicle level.

Lenders may seek security including pledges over the shares being acquired.

Where the target is a Turkish joint-stock company, acquisition financing must be structured carefully because TCC Article 380 restricts financial assistance by a company for the acquisition of its own shares.

Accordingly, management and lenders should not assume that the target can simply guarantee the debt used by management to purchase the target.

This issue becomes particularly important in highly leveraged MBOs.

Seller Financing

The seller itself may finance part of an MBO.

For example, management may pay 70% of the purchase price at closing and the remaining 30% over three years.

This can make a transaction possible where management cannot obtain sufficient bank financing.

However, the seller becomes a creditor of the buyer.

The seller should therefore consider security such as a share pledge, guarantee or another agreed protection.

The SPA should also regulate whether the buyer may set off warranty claims against deferred consideration.

Earn-Outs

The seller may also accept part of the price through an earn-out.

For example, the seller receives additional consideration if EBITDA reaches an agreed level during the two years following closing.

An earn-out in an MBO has a distinctive feature:

the management buyers responsible for operating the company may also control the financial results that determine what remains payable to the seller.

This can create disputes.

The agreement should therefore contain objective accounting standards and information rights for the seller.

Due Diligence Is Still Necessary

It may appear unnecessary for management to conduct due diligence on a company it already runs.

That assumption is dangerous.

Managers may understand operations but lack complete knowledge of:

Historical tax issues;
Corporate records;
Share ownership;
Legacy litigation;
Real estate title;
Environmental liabilities;
Historical shareholder arrangements.

A CEO may know the company’s customers extremely well while knowing little about a tax structure created ten years earlier.

The financial sponsor and acquisition lenders will also require independent due diligence.

An MBO should therefore not eliminate legal, financial or tax review.

Management Knowledge and Seller Warranties

One of the most difficult negotiation issues is the interaction between seller warranties and management knowledge.

Suppose the acquisition vehicle is owned by management and a private equity investor.

Can the buyer later claim breach of warranty for something the CEO knew before closing?

The seller may argue that management’s knowledge should automatically be attributed to the buyer.

The financial investor may resist.

Otherwise, it could lose warranty protection because a management shareholder knew about a liability but failed to tell the investor.

The SPA should define Buyer Knowledge carefully.

Management Knowledge Should Not Be Left Undefined

The agreement may distinguish between:

Knowledge of the financial investor;
Knowledge of named management individuals;
Information specifically disclosed in the data room.

This is particularly important where management holds only a minority interest in the acquisition vehicle.

A private equity fund should understand whether management knowledge affects its remedies before signing.

Otherwise, disputes may arise immediately after closing over whether a known management issue constitutes a valid warranty claim.

Seller Warranties

The seller may provide warranties concerning the target even though management already operates the company.

These may include fundamental matters such as:

Ownership of shares;
Authority to sell;
Absence of share encumbrances.

Business warranties may require more negotiation because management may already know the underlying facts.

A financial investor will nevertheless usually require contractual protection concerning tax, litigation, ownership, compliance and other historical matters.

Specific risks identified during due diligence should be addressed through indemnities rather than relying only on broad warranties.

Management Warranties

The financial sponsor may also require warranties from management.

For example, management may make representations concerning:

Business plan;
Information supplied to investor;
Undisclosed interests;
Ownership of management shares.

However, management usually has significantly less financial capacity than the institutional seller.

Unlimited warranty liability can therefore be inappropriate.

Management warranties should be tailored to the managers’ role, knowledge and economic participation.

Management Business Plan

The financial sponsor will generally invest on the basis of a management-prepared business plan.

The plan may include projections concerning:

Revenue growth;
EBITDA;
New locations;
International expansion;
Capital expenditure;
Headcount.

The sponsor should perform independent commercial and financial review.

A business plan is inherently forward-looking.

Management should not be treated as guaranteeing every commercial forecast unless the documents expressly create such an obligation.

There is a substantial difference between warranting that historical information is accurate and guaranteeing future performance.

Management Employment Agreements

Management may become both shareholders and employees after closing.

These roles should be legally separated.

The shareholders’ agreement governs management as investors.

Employment or service agreements govern management’s operational role.

An executive may therefore cease employment but remain a shareholder unless the documents contain a valid leaver mechanism.

This distinction is fundamental to management equity structures.

Good Leaver and Bad Leaver Provisions

Private equity-backed MBOs frequently include good leaver/bad leaver rules.

If a manager leaves the business before the investor exits, some or all management shares may become subject to compulsory transfer.

A good leaver may include circumstances such as death, long-term incapacity or termination without cause.

A bad leaver may include fraud, serious misconduct or certain voluntary departures.

The economic treatment of the shares may differ.

However, extremely punitive arrangements should be assessed carefully under Turkish law.

The formula should be clearly linked to objectively identifiable circumstances.

Management Vesting

Management equity may vest gradually.

For example, part of the economic interest becomes fully secured after each year of continued employment.

If the manager leaves early, unvested equity may be transferred under an agreed mechanism.

Vesting can encourage management retention during the private equity holding period.

The structure should clearly distinguish contractual economic expectations from the formal legal ownership of Turkish company shares.

Call Options Over Management Shares

The investor may receive a call option if a manager leaves.

The option may permit the investor or another shareholder to acquire the departing manager’s shares.

The agreement should identify:

Trigger;
Exercise period;
Price;
Payment mechanics;
Share transfer formalities.

The option must be capable of implementation within Turkish corporate rules applicable to the relevant company type.

A contractual option does not eliminate mandatory share transfer procedures.

Management Share Transfer Restrictions

Management investors are generally prohibited from freely selling their shares while the sponsor remains invested.

The purpose is to maintain alignment and avoid an unknown shareholder entering the company.

Permitted transfers may be allowed in limited circumstances.

Any permitted transferee should ordinarily be required to accede to the shareholders’ agreement.

Drag-Along Rights

A private equity sponsor will usually require a strong drag-along mechanism.

When the sponsor finds a buyer for the entire company, management cannot be permitted to prevent the exit merely because it prefers to remain invested.

The drag mechanism should therefore require management to sell its shares when the agreed threshold is satisfied.

Management should generally receive the same economic terms for equivalent shares, subject to differences arising from valid share classes or incentive structures.

Tag-Along Rights

Management may also receive tag-along protection.

If the sponsor sells control but does not exercise a drag, managers may want the right to participate in the sale.

Otherwise, they could remain minority shareholders under an entirely new controlling investor.

Tag rights should be coordinated with the overall exit strategy.

IPO Exit

Some MBOs are structured with a future IPO in mind.

The shareholders’ agreement may require management to cooperate with:

Corporate restructuring;
Audits;
Capital markets documentation;
Governance changes;
Lock-up arrangements.

Certain private shareholder rights may no longer be suitable after a public offering.

The management incentive structure should therefore anticipate what happens if the company becomes publicly listed.

Reserved Matters

The financial investor will generally require veto rights over significant decisions.

Reserved matters may include major borrowing, acquisitions, asset disposals, related-party transactions, capital increases and material deviation from the business plan.

Management may retain responsibility for ordinary operations.

The governance structure should prevent two extremes:

management should not be able to undertake transformative transactions without investor consent, but the investor should not need to approve every ordinary commercial decision.

Board Composition

The board after closing may include representatives of both management and the financial sponsor.

The shareholders’ agreement may give the sponsor the right to appoint a majority of directors.

Management may receive one or more seats.

An independent director may also be appointed.

Regardless of who nominated them, directors of a Turkish joint-stock company remain subject to statutory corporate duties.

TCC Article 369 requires board members and managers to act with the care of a prudent manager and protect the interests of the company.

A sponsor-appointed director therefore does not act merely as the fund’s contractual agent when performing board duties.

Post-Closing Conflicts

Conflicts do not disappear after closing.

Management shareholders may want higher salaries.

The investor may prefer greater dividends or reinvestment.

Management may propose a related-party transaction.

The sponsor may seek a sale earlier than management prefers.

The shareholders’ agreement should anticipate these tensions.

Clear governance mechanisms are considerably cheaper than attempting to resolve every disagreement through litigation or arbitration.

Management Remuneration

The transaction should distinguish between return on equity and remuneration for employment.

Management may receive salary, bonus and equity upside.

If these elements are mixed together, tax and governance problems may arise.

Board remuneration must also comply with applicable TCC requirements. Article 394 provides that board members may receive attendance fees, salary, bonuses, premiums and a share of annual profit where the amount is determined through the articles or general assembly decision as required.

The post-closing compensation structure should therefore be properly authorised.

Related-Party Transactions After the MBO

Managers who become shareholders may have interests in other companies.

The target may purchase services or lease property from those entities.

Related-party transactions should be subject to transparent approval procedures.

The company should not become a vehicle through which management shareholders extract value outside the agreed salary, dividend and incentive structure.

An institutional investor will typically require arm’s-length terms and approval for material related-party arrangements.

Competition Authority Clearance

An MBO is not exempt from Turkish merger control merely because existing managers are participating in the acquisition.

The key question remains whether the transaction results in a permanent change of control and whether the applicable turnover thresholds are exceeded.

The Turkish Competition Authority updated the merger-control thresholds in February 2026. The individual Turkish turnover threshold was increased from TRY 250 million to TRY 1 billion, the combined Turkish turnover threshold from TRY 750 million to TRY 3 billion and the relevant worldwide threshold from TRY 3 billion to TRY 9 billion. (Rekabet Kurumu)

The Authority subsequently updated its merger and acquisition guidelines in May 2026. (Rekabet Kurumu)

For an MBO backed by a private equity sponsor, turnover analysis may need to consider the investor’s broader controlled portfolio rather than management alone.

Private Equity Control

Management may appear to be the commercial buyer while the private equity fund has legal control.

For example, management may own 20% while the sponsor owns 80% and appoints the majority of directors.

Competition analysis should reflect the actual control structure.

Alternatively, the sponsor and management may jointly control the acquisition vehicle if both have decisive strategic rights.

Reserved matters should therefore be reviewed from a competition-law perspective before signing.

Regulated Businesses

Where the target operates in a regulated industry, management familiarity with the company does not eliminate change-of-control approval.

Relevant sectors may include banking, insurance, payment services, energy, telecommunications, aviation and healthcare.

The regulator may need to assess the new investor or acquisition vehicle.

Where a private equity sponsor is involved, the regulator may request information concerning ultimate ownership, funding and governance.

Regulatory approval should normally be treated as a condition precedent where required.

Employment Issues During the Buyout

An MBO itself does not ordinarily change the employer in a share acquisition.

The target company remains the same legal entity.

Employees generally continue under their existing employment agreements.

However, management may implement restructuring after closing.

Any later redundancies, workplace changes or modifications of employment conditions should be analysed separately under Turkish labour law.

Management should not assume that becoming the company’s owner gives unrestricted authority to rewrite existing employee rights.

Key Employee Retention

Management may be acquiring a business whose value depends on personnel below the senior management level.

Sales directors, engineers, programmers and technical personnel may be essential.

The acquisition plan should therefore identify key employees and determine whether retention arrangements are necessary.

A management team that focuses only on financing its own equity may discover after closing that critical personnel leave because of uncertainty created by the transaction.

Tax Considerations

Management buyouts can create tax issues at several levels.

Relevant matters may include taxation of share sales, management rollover, shareholder loans, interest payments, equity incentives, management bonuses and future exit proceeds.

Where management receives shares at a value significantly different from market value as part of an employment-related arrangement, tax treatment should be assessed carefully.

A management incentive structure should not be implemented solely on the basis of its corporate-law design.

Turkish tax advisers should review the structure before shares or options are granted.

Management Buyout of a Family Business

MBOs can be particularly attractive for family businesses facing succession problems.

A founder may have children who do not want to operate the business.

The existing professional management team may nevertheless have worked for the company for many years.

An MBO can provide the founder with an exit while preserving the company’s identity and employees.

Seller financing may be particularly useful in this context because management may not have sufficient initial capital.

The founder may also retain a minority shareholding temporarily before making a complete exit.

Management Buyout Following Private Equity Ownership

A different structure arises when the seller is already a private equity fund.

The fund may have invested in the company several years earlier and now requires an exit.

Management may wish to remain invested and lead a new acquisition backed by another financial sponsor.

This is sometimes described as a sponsor-to-sponsor transaction with management rollover.

The new investor should independently verify information even though management participated in the previous ownership period.

Management Buyout in Distressed Situations

An MBO may also arise where the company is financially distressed.

Management may believe that the business remains viable despite excessive debt.

In such circumstances, the acquisition may involve creditor negotiations, debt restructuring or rescue investment.

The transaction should be analysed together with insolvency, capital-loss and creditor-protection rules.

Managers should be particularly cautious because their existing duties toward the company continue while they negotiate personally beneficial ownership arrangements.

The SPA in an MBO

The share purchase agreement should address issues found in ordinary acquisitions but with additional attention to management-specific matters.

The principal issues usually include purchase price, payment mechanics, conditions precedent, warranties, indemnities, management knowledge, financing and closing.

Where the seller provides financing or deferred consideration, the SPA should include appropriate protection.

Where management knowledge qualifies warranties, the relevant individuals should be expressly identified.

The Shareholders’ Agreement Is Often as Important as the SPA

In an ordinary 100% acquisition, the SPA may be the dominant transaction document.

In an MBO backed by a private equity investor, the shareholders’ agreement may be equally important.

The SPA determines how the company is acquired.

The shareholders’ agreement determines how management and investors will live together afterwards.

It should regulate governance, management equity, reserved matters, leaver provisions, transfers and exit.

Poor post-closing governance can destroy an otherwise successful acquisition.

Exit Should Be Agreed at Entry

Management may see the MBO as a long-term ownership opportunity.

A private equity fund typically has a finite investment horizon.

This difference should be addressed at the beginning.

The investor may expect an exit through a strategic sale, secondary private equity transaction or IPO after several years.

Management should understand that drag-along provisions may eventually require it to sell.

The MBO should therefore answer not only how management enters the ownership structure, but also how it will ultimately leave it.

Common Management Buyout Risks

MBOs frequently become problematic when management’s dual role is not recognised.

The most serious risks include conflicts of interest, use of undisclosed information, undervaluation of the company, unclear management knowledge provisions, inadequate financing, inappropriate target-level acquisition support and poorly structured management equity.

Post-closing disputes may also arise because leaver rules, management incentives or exit obligations were treated as secondary issues during acquisition negotiations.

An MBO therefore requires more than a standard SPA with managers replacing an external buyer.

Practical Management Buyout Checklist

Before completing an MBO involving a Turkish company, the parties should generally:

Identify all management participants and their existing corporate duties.
Establish a process for managing conflicts of interest.
Ensure conflicted directors do not improperly participate in board decisions.
Consider an independent valuation.
Determine whether the business should be exposed to alternative bidders.
Control management’s use of confidential information.
Conduct independent legal, financial and tax due diligence.
Establish the management and investor equity contributions.
Determine any rollover equity.
Structure acquisition financing and seller financing.
Analyse TCC financial assistance restrictions where relevant.
Define management knowledge for warranty purposes.
Agree management employment arrangements.
Establish good-leaver and bad-leaver provisions.
Structure vesting and incentive mechanisms.
Determine board composition and reserved matters.
Establish related-party transaction controls.
Conduct Competition Authority and regulatory analysis.
Agree tag-along, drag-along and other transfer rights.
Define the future exit strategy before closing.

Conclusion

Management buyouts offer an effective route for transferring ownership of Turkish companies to executives who already understand the business.

They can provide continuity for founders, family shareholders and corporate sellers while giving management an opportunity to become economically invested in future growth.

However, the very feature that makes an MBO attractive also creates its greatest legal risk: management is both an insider of the target and a potential purchaser.

Turkish corporate law requires board members and managers to protect the company’s interests and expressly regulates conflicts of interest. Under TCC Article 393, conflicted board members must refrain from participating in relevant deliberations, while Article 369 imposes duties of care and loyalty toward the company.

An MBO should therefore be designed around transparent valuation, independent decision-making and clear separation between management’s role within the target and its role within the acquisition consortium.

Where private equity or acquisition debt is involved, management equity, financing, shareholder governance and exit arrangements must also be structured together. Merger-control requirements remain applicable, and Turkey’s February 2026 amendments materially increased the notification thresholds for qualifying acquisitions. (Rekabet Kurumu)

The strongest management buyout is therefore not merely one in which executives successfully finance the purchase of their employer. It is one in which the conflicts inherent in that purchase have been identified and controlled, the company has been independently valued, the financing is legally sustainable and the relationship between management and financial investors has been defined before ownership changes.

This article provides general information on Turkish law and does not constitute legal, financial, investment or tax advice. Each management buyout should be assessed individually according to the management team’s existing duties, target company, acquisition financing, ownership structure and intended post-closing governance.

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Management Buyouts in Turkey: Management Equity, Conflicts of Interest, Financing, Governance and Exit Strategies