Introduction

Carve-out transactions are increasingly used in Turkey where a company wishes to separate one business line from the rest of its operations before a sale, investment, joint venture or internal restructuring.

Unlike the acquisition of a standalone company, a carve-out requires the parties first to determine exactly what constitutes the business being transferred.

The relevant business may currently share:

• Employees;
• Bank accounts;
• IT systems;
• Real estate;
• Customer contracts;
• Intellectual property;
• Licences;
• Accounting functions;
• Suppliers;
• Management personnel

with other divisions of the seller.

The legal challenge is therefore not simply transferring ownership. The objective is to create a business perimeter capable of operating independently after closing.

Under Turkish law, a carve-out may be structured through an asset transfer, transfer of a commercial enterprise, partial demerger, establishment of a new subsidiary followed by a share sale, or a combination of these techniques.

The appropriate structure depends on corporate law, taxation, employees, creditor protection, regulatory licences and the commercial objectives of the parties.

What Is a Carve-Out Transaction?

A carve-out involves separating a particular division, product line, geographic activity or business unit from a larger company or corporate group.

For example, a Turkish industrial group operating in:

• Automotive manufacturing;
• Logistics;
• Energy;
• Software

may decide to sell only its software division.

If the software business already operates through a separate subsidiary, the transaction may simply involve selling that subsidiary’s shares.

If the software operations are legally contained within the same company as the other businesses, the seller must first identify and separate the relevant assets, liabilities, employees and contracts.

This separation process is the core of a carve-out.

Why Companies Use Carve-Out Structures

Carve-outs may be used to:

• Sell a non-core business;
• Prepare a business division for private equity investment;
• Establish a joint venture;
• Separate high-risk activities;
• Simplify a corporate group;
• Create an independent subsidiary;
• Separate family-owned business divisions;
• Prepare a division for an IPO;
• Facilitate succession planning;
• Separate regulated and unregulated activities.

A carve-out may also increase transaction value.

A strategic buyer interested only in one business division may be unwilling to acquire the seller’s entire corporate structure. Separating the relevant business can therefore create a more attractive acquisition target.

Identifying the Business Perimeter

The first major legal task is determining what actually belongs to the carved-out business.

The transaction team should prepare a detailed perimeter identifying:

Assets

These may include machinery, inventory, vehicles, office equipment, receivables, real estate, trademarks, software, databases and licences.

Liabilities

The parties should identify trade payables, employee obligations, warranties, customer claims, financing and litigation relating to the division.

Contracts

Customer, supplier, distributor, lease, technology and service agreements should be allocated.

Employees

The employees who primarily work for the business should be identified.

Intellectual property

Ownership and use of trademarks, software, patents and know-how must be determined.

A poorly defined perimeter may result in the buyer acquiring a business that cannot operate independently.

Principal Carve-Out Structures in Turkey

There is no single legal structure called a “carve-out” under Turkish law.

Instead, the transaction may be implemented through several established legal mechanisms.

Asset Transfer

The seller may directly transfer selected assets to the buyer or to a newly incorporated subsidiary.

Individual transfer requirements apply depending on the asset.

For example:

• Real estate requires land registry procedures;
• Vehicles require applicable registration procedures;
• Receivables require assignment;
• Intellectual property requires assignment and, where appropriate, registry filings;
• Contracts may require counterparty consent.

An asset transaction gives the parties significant flexibility in defining the perimeter, but implementation may be administratively complex.

Commercial Enterprise Transfer

Where the transferred assets constitute an entire commercial enterprise, the transaction may be structured as a commercial enterprise transfer.

The Turkish Commercial Code permits a commercial enterprise to be transferred as a whole under a written agreement that is registered and announced through the trade registry.

Unless otherwise agreed, the statutory framework permits the transfer to encompass the assets allocated to the operation of the enterprise.

The transaction should nevertheless include a detailed schedule identifying transferred and excluded assets and liabilities.

Partial Demerger

A corporate carve-out may also be implemented through a partial demerger under Articles 159 and following of the Turkish Commercial Code.

In a partial demerger, one or more parts of a company’s assets are transferred to another existing or newly established company. Depending on the structure, the shares received in return may remain with the demerging company or be allocated to its shareholders. The transaction becomes effective upon trade registry registration. (TBMM CDN)

This structure may be particularly useful where the seller wants to separate a business into a standalone subsidiary before selling the subsidiary’s shares.

For example:

Seller Company → Business Division A + Business Division B

may become:

Seller Company → Business Division A

and

New Subsidiary → Business Division B

The seller may then sell the shares of the new subsidiary to the investor.

This approach is sometimes referred to commercially as a “carve-out and sell” structure.

Hive-Down Structure

A commonly considered structure is to transfer the relevant business to a newly established subsidiary and subsequently sell the subsidiary.

This may simplify the acquisition because the buyer ultimately acquires shares rather than individually acquiring hundreds of assets and contracts.

The steps may involve:

1. Establishing a new subsidiary;
2. Transferring the business division;
3. Allocating relevant employees and contracts;
4. Establishing standalone systems;
5. Selling the new subsidiary to the buyer.

The legal and tax structure of the transfer into the subsidiary should be analysed before the share sale agreement is signed.

Legal and Tax Carve-Out Are Not the Same

A critical point in Turkish restructuring is that a transaction qualifying as a partial demerger under the Turkish Commercial Code does not automatically qualify as a tax-neutral partial demerger.

The tax rules are narrower.

According to the 2026 Corporate Tax return guidance published by the Revenue Administration, tax-neutral partial demergers under Corporate Tax Law Article 19 currently cover qualifying participation shares held for at least two full years and one or more production or service businesses transferred at book value. Where a production or service business is transferred, the assets and liabilities required to maintain business integrity must be transferred together. (GİB Cdn)

This distinction should be analysed at the beginning of the transaction.

Real Estate and Tax-Neutral Partial Demergers

One particularly important change concerns real estate.

Under the current tax framework, standalone real estate is no longer listed among the assets independently eligible for tax-neutral partial demerger treatment. The Revenue Administration’s 2026 Corporate Tax guidance describes the current eligible categories as qualifying participation shares and production or service businesses. (GİB Cdn)

Accordingly, a company should not assume that moving a property into a new subsidiary through a TCC-compliant restructuring will automatically be tax neutral.

The tax consequences must be separately calculated.

Business Integrity Requirement

Where a production or service business is transferred under the tax-neutral partial demerger rules, operational integrity is critical.

The Revenue Administration states that all assets and liabilities required for continuation of the transferred production or service activity must move together. (Gelir İdaresi Başkanlığı)

This may include, depending on the business:

• Machinery;
• Inventory;
• Relevant receivables;
• Trade payables;
• Employees;
• Operational contracts;
• Licences;
• Business premises;
• Related accounting items.

Attempting to transfer only profitable assets while leaving liabilities necessary for the business behind may jeopardise the intended tax treatment.

Employee Allocation

Employee separation is one of the most important aspects of a carve-out.

Employees may currently work across several business divisions.

The parties should identify:

• Employees dedicated entirely to the carved-out business;
• Employees providing shared services;
• Senior management supporting several divisions;
• Temporary workers;
• Consultants and independent contractors.

Where a workplace or part of a workplace is transferred to another employer, Article 6 of the Labour Law provides that employment agreements existing on the transfer date pass to the transferee together with their rights and obligations. The transferee must respect service periods beginning with the employee’s original commencement date. (TBMM CDN)

A carve-out should therefore not assume that employee seniority begins again after transfer.

Shared Employees

Some employees may work partly for the carved-out division and partly for the seller’s retained operations.

Possible solutions include:

• Allocating the employee to one business;
• Hiring additional personnel;
• Temporary secondment;
• Transitional service arrangements;
• Reorganisation of duties.

The actual organisational relationship should be examined rather than relying only on payroll cost-centre codes.

Senior executives serving the entire group may remain with the seller while temporarily supporting the carved-out company under a transitional services agreement.

Employee Benefits

The parties should identify all accrued employment obligations associated with transferring employees.

These may include:

• Salary;
• Bonus;
• Annual leave;
• Overtime;
• Severance exposure;
• Company vehicles;
• Private health insurance;
• Incentive arrangements.

The transaction agreement should allocate responsibility for pre-closing liabilities between buyer and seller, while recognising that mandatory employee rights cannot simply be eliminated through contractual allocation between the parties.

Contract Separation

Contracts often present one of the greatest practical difficulties in a carve-out.

A customer agreement may cover several divisions of the seller rather than only the business being sold.

The parties must determine whether the contract should be:

• Assigned entirely;
• Partially transferred;
• Replaced by a new contract;
• Divided between seller and buyer;
• Temporarily serviced through a transitional arrangement.

Counterparty consent may be required.

A buyer should not assume that the seller can unilaterally allocate part of a contract where the counterparty originally contracted with the seller for a broader relationship.

Customer Contracts

The transaction team should identify the contracts that generate the carved-out business’s revenue.

Particular attention should be given to:

• Assignment restrictions;
• Termination rights;
• Minimum volumes;
• Exclusivity;
• Change-of-control clauses;
• Customer consent requirements.

If several key customers refuse consent, the economic value of the carved-out business may be materially affected.

Required customer consents may therefore become conditions precedent to closing.

Supplier Contracts

The carved-out business may benefit from favourable group-wide purchasing arrangements.

After separation, the buyer may not automatically obtain those terms.

For example, the seller may purchase raw materials for five subsidiaries under one global contract.

A single carved-out business may not be entitled to continue using the same pricing after closing.

The parties may therefore require:

• New supplier contracts;
• Temporary procurement support;
• Transitional purchasing arrangements.

Standalone operating costs should be included when determining valuation.

Shared Assets

Businesses frequently share physical assets.

Examples include:

• Warehouses;
• Production lines;
• Vehicles;
• Servers;
• Office premises.

The parties should determine whether the relevant asset will:

• Transfer to the carved-out business;
• Remain with the seller;
• Be jointly used temporarily;
• Be leased after closing.

Shared assets should not be left to informal arrangements.

A business may otherwise technically separate while remaining dependent on assets controlled by the seller.

Real Estate Separation

Real estate may require particular attention.

The carved-out business may operate from:

• Seller-owned property;
• Third-party leased premises;
• Shared industrial facilities.

If the real estate remains with the seller, the new business may require a lease agreement.

The lease should address:

• Rent;
• Duration;
• Utilities;
• Maintenance;
• Access;
• Expansion rights;
• Termination.

Where ownership will transfer, land registry, tax and security issues must be addressed separately.

Intellectual Property

A carve-out often creates difficult intellectual property questions.

The transferred business may use:

• Group trademarks;
• Shared software;
• Patents;
• Technical designs;
• Know-how;
• Domain names.

Some rights may belong exclusively to the seller but be used throughout the group.

The parties must decide whether intellectual property will be:

• Transferred;
• Licensed permanently;
• Licensed temporarily;
• Shared.

For example, the seller may retain ownership of a corporate trademark but allow the carved-out business to continue using the name for six months after closing.

This should be documented through a transitional trademark licence.

Software and IT Systems

IT separation is frequently one of the longest components of a carve-out.

The carved-out business may depend on group systems for:

• Accounting;
• Email;
• ERP;
• Customer management;
• Payroll;
• Cybersecurity;
• Cloud storage.

Migrating these systems may take months.

A buyer should identify:

• Which software licences are transferable;
• Whether new licences are required;
• How historical data will be migrated;
• Who will provide technical support;
• When seller access will end.

IT separation costs should form part of the overall transaction budget.

Personal Data

Carve-outs may involve the transfer of customer and employee databases from the seller to the buyer or newly incorporated company.

The legal basis and scope of the transfer should be reviewed under Turkish data protection legislation.

Particular attention is required where the buyer’s IT infrastructure is located outside Turkey.

Since June 2024, Turkish law provides mechanisms for international transfers including adequacy decisions, standard contracts, binding corporate rules and other appropriate safeguards under the statutory framework. (KVKK)

The Turkish Data Protection Authority currently publishes four types of standard cross-border transfer contracts depending on whether the relevant parties are controllers or processors. (KVKK)

The Authority also confirmed in its July 2026 guidance that standard contracts must be notified to the Authority within five business days after signature. (KVKK)

Regulatory Licences

A major issue is whether the carved-out business has its own licences.

A business division may rely on permits held by the seller.

This becomes particularly important in sectors such as:

• Energy;
• Healthcare;
• Education;
• Telecommunications;
• Food;
• Pharmaceuticals;
• Aviation;
• Mining;
• Financial services.

A licence may:

• Transfer automatically;
• Require regulatory approval;
• Be non-transferable;
• Require a completely new application.

The buyer should confirm licence continuity before closing.

A business without the required licence may be legally separated but commercially unable to operate.

Transitional Services Agreements

A Transitional Services Agreement (TSA) is one of the most important documents in a carve-out transaction.

The seller may continue providing certain services to the carved-out business for a limited period after closing.

Services may include:

• Accounting;
• Payroll;
• IT;
• Procurement;
• Warehousing;
• HR;
• Legal administration;
• Customer support;
• Office facilities.

The objective is to provide continuity while the buyer creates independent systems.

Drafting a TSA

A TSA should specify:

• Services;
• Service levels;
• Duration;
• Fees;
• Employees providing services;
• Data access;
• Liability;
• Cybersecurity;
• Termination;
• Migration assistance.

The duration should be realistic.

Three months may be sufficient for payroll separation but completely inadequate for migrating a complex ERP system.

The buyer should also avoid indefinite dependence on the seller.

Reverse Transitional Services

Sometimes the seller also depends on the carved-out business after closing.

For example, a central IT department may be transferred with the sold division but continue providing systems to the seller.

The buyer may therefore provide temporary services back to the seller.

This is commonly referred to as a reverse TSA.

Both directions of dependency should be identified during due diligence.

Stranded Costs

A carve-out can create costs that did not previously exist because functions were shared within the group.

These may include separate:

• Finance departments;
• IT licences;
• Insurance;
• HR;
• Office premises;
• Management.

A division that appeared highly profitable inside a large group may become materially less profitable when required to operate independently.

Buyers should therefore conduct a standalone cost analysis rather than relying only on historical divisional accounts.

Carve-Out Financial Statements

A business division may not have standalone audited financial statements.

The seller may therefore need to prepare carve-out financial information allocating:

• Revenue;
• Direct costs;
• Shared overhead;
• Employees;
• Assets;
• Liabilities.

The buyer should examine how group costs have historically been allocated.

Artificially low head-office allocations can overstate the division’s standalone profitability.

Financial due diligence should therefore be closely coordinated with legal perimeter analysis.

Related-Party Agreements

After separation, arrangements previously handled informally within the group may need formal contracts.

Examples include:

• Property leases;
• Trademark licences;
• IT services;
• Supply agreements;
• Distribution agreements.

The SPA should identify which agreements must be executed at closing.

A company should not become independent while continuing to rely on undocumented related-party arrangements.

Financing

The carved-out business may have no independent banking arrangements.

The seller’s group may historically provide:

• Working capital;
• Guarantees;
• Cash pooling;
• Bank facilities.

These may terminate upon separation.

The buyer should therefore arrange standalone financing before closing.

Existing guarantees provided by the seller should also be released or replaced.

Guarantees and Security

The carved-out division may benefit from guarantees issued by the seller or its parent company.

The transaction documents should identify:

• Bank guarantees;
• Performance guarantees;
• Parent guarantees;
• Letters of credit.

The buyer may need to replace them before closing.

Likewise, security covering group-wide financing may extend over assets intended to transfer.

Required lender releases should be conditions precedent.

Litigation

Litigation relating to the carved-out business should be allocated carefully.

The parties must determine responsibility for claims arising:

• Before closing;
• After closing;
• From products sold before closing;
• From continuing contracts.

In a statutory demerger, liability may also be affected by mandatory creditor protection rules under the Turkish Commercial Code.

Contractual allocation between buyer and seller should therefore be distinguished from liability toward third parties.

Creditor Protection in a Partial Demerger

A statutory demerger is not simply an internal allocation of assets.

Creditors receive specific protections under the TCC.

The demerger procedure includes creditor announcements and the possibility of requesting security. The division becomes legally effective upon registration, at which point the allocated assets and liabilities transfer pursuant to the statutory mechanism. (TBMM CDN)

The timetable for a demerger should therefore incorporate creditor-protection steps rather than treating registration as an immediate administrative formality.

Competition Authority Clearance

A carve-out acquisition may constitute a notifiable concentration if the transferred business represents a business activity to which market turnover can be attributed and the transaction results in a permanent change of control.

The fact that the buyer is acquiring assets rather than company shares does not automatically take the transaction outside merger control.

An operating business including assets, contracts, employees and customer relationships may constitute a relevant economic unit.

Merger-control analysis should therefore form part of transaction planning.

Carve-Out and Sale Agreement

The acquisition agreement should contain detailed provisions concerning the business perimeter.

Schedules may identify:

• Transferred assets;
• Excluded assets;
• Assumed liabilities;
• Excluded liabilities;
• Employees;
• Contracts;
• Intellectual property;
• Licences;
• Litigation.

The clearer the schedules, the lower the risk of post-closing disagreement.

A clause referring simply to “all assets relating to the business” may be insufficient where assets are used by several divisions.

Wrong-Pocket Provisions

Carve-out agreements often include wrong-pocket provisions.

These address assets or payments that end up with the wrong party after closing.

For example:

• Seller receives a customer payment belonging to buyer;
• Buyer receives a receivable relating to seller’s retained business;
• An asset intended to transfer is discovered later.

The parties agree to transfer the relevant asset or funds promptly without additional economic benefit.

Wrong-pocket clauses are particularly useful in complex separations where complete accuracy at closing may be difficult.

Pre-Closing Reorganisation

A carve-out commonly requires substantial work before the acquisition itself closes.

This may include:

• Incorporating NewCo;
• Completing a demerger;
• Transferring employees;
• Assigning IP;
• Obtaining licences;
• Separating IT systems;
• Executing new contracts.

The SPA should clearly identify which reorganisation steps must occur before closing.

The buyer may also require approval rights over changes to the agreed perimeter.

Conditions Precedent

Typical conditions precedent may include:

• Completion of the agreed corporate separation;
• Regulatory approvals;
• Competition clearance;
• Transfer of key contracts;
• Customer consents;
• Licence issuance;
• Release of security;
• Execution of TSAs.

The buyer should distinguish between matters essential for Day One operations and matters that can safely be completed after closing.

Day One Readiness

A successful carve-out requires the new business to function independently on closing day.

At minimum, the buyer should confirm access to:

• Bank accounts;
• Employees;
• Customer contracts;
• Premises;
• IT systems;
• Intellectual property;
• Required licences;
• Accounting;
• Payroll.

A transaction may technically close but commercially fail if employees cannot receive salaries or customers cannot place orders on the following day.

Common Carve-Out Risks

Common problems include:

• Defining the business perimeter too broadly or vaguely;
• Failing to transfer key contracts;
• Ignoring shared employees;
• Assuming licences transfer automatically;
• Failing to identify shared IP;
• Underestimating IT separation costs;
• Using historical divisional accounts without standalone cost adjustments;
• Treating a corporate partial demerger as automatically tax neutral;
• Ignoring creditor rights;
• Transferring personal data without proper analysis;
• Failing to replace seller guarantees;
• Using an incomplete TSA;
• Leaving critical operational assets with the seller.

Practical Carve-Out Checklist

Before completing a carve-out transaction in Turkey, the parties should generally:

1. Define the exact business perimeter.
2. Identify transferred and excluded assets.
3. Identify transferred and excluded liabilities.
4. Select asset transfer, enterprise transfer or demerger structure.
5. Analyse tax-neutral restructuring conditions separately.
6. Identify employees and shared personnel.
7. Review customer and supplier contracts.
8. Identify third-party consents.
9. Map intellectual property.
10. Confirm regulatory licences.
11. Review real estate requirements.
12. Prepare standalone financing.
13. Analyse IT and data separation.
14. Establish transitional services.
15. Identify stranded costs.
16. Prepare carve-out financial information.
17. Review creditor protection requirements.
18. Conduct merger-control analysis.
19. Prepare detailed transfer schedules.
20. Establish a Day One readiness plan.

Conclusion

Carve-out transactions are among the most complex forms of Turkish M&A because the parties are not simply transferring an existing standalone company. They are creating one.

The success of the transaction depends on accurately separating assets, liabilities, contracts, employees, technology and operational infrastructure from the seller’s remaining business.

Turkish law provides several possible structures, including asset transfers, commercial enterprise transfers and partial demergers. The corporate structure should be selected together with tax advisers because a legally valid TCC demerger does not automatically qualify as a tax-neutral restructuring.

The current Corporate Tax Law framework is particularly important: tax-neutral partial demerger treatment is focused on qualifying participation shares and production or service businesses, and the integrity of a transferred operating business must be maintained. (GİB Cdn)

Employee continuity, customer contracts, licences, intellectual property and IT separation should also be addressed well before closing.

A properly executed carve-out therefore requires much more than a transfer agreement. It requires a coordinated separation plan capable of delivering an independently functioning business to the buyer from Day One.