Mergers and Acquisitions in Turkey: The Legal Process

Company acquisitions, mergers, and demergers (M&A) are among the most complex legal transactions in commercial life. Acquisition of Turkish companies by foreign investors or merger of domestic companies with foreign capital has become an increasing trend in recent years. The experience our Antalya law firm has accumulated over years advising on M&A transactions in tourism, technology, real estate, and healthcare sectors forms the foundation of this guide.

Types of Company Transfer Transactions

1. Share Deal

Acquisition of target company's shares by buyer. In this structure:

• Company's legal personality remains the same,
• Employees, contracts, licenses automatically continue,
• Existing debts and liabilities remain in company,
• Past risks transfer to buyer.

All company assets indirectly change hands; this is the most common M&A model.

2. Asset Deal

Selectively selling company's specific assets (real estate, machinery, intellectual property, customer contracts, etc.). In this structure:

• Buyer takes only desired assets,
• Debts and past liabilities remain with seller,
• Counterparty consent may be needed in each contract for transfer of customer contracts,
• Labour law rules apply for transfer of employees,
• Different consequences arise in tax terms.

In risk management terms, asset deal is often safer for buyer; however, operationally more complex.

3. Merger

Merging of two or more companies under single legal person. Two types:

• Merger by takeover: One company absorbs another, absorbed company loses legal personality.
• Merger by new formation: Merging companies lose legal personalities, new company is formed.

M&A through merger:

• It is carried out based on general assembly decisions,
• A special regime may apply tax-wise,
• Employee transfer is automatic,
• Contracts automatically pass to the new legal person.

4. Demerger

Splitting of company's assets and operations into two or more companies. Used for family business restructuring, separation of activity areas, or formation of subsidiary.

Steps of M&A Process

Step 1: Preliminary Discussions and Letter of Intent

A Letter of Intent (LOI) or Memorandum of Understanding documenting parties' fundamental understanding is signed. This document:

• Generally non-binding (except confidentiality and exclusivity provisions),
• Sets out main lines of transaction,
• Opens way for due diligence,
• Sets negotiation timetable.

Step 2: Due Diligence

Buyer carefully reviews target company:

• Legal due diligence: Articles of association, share structure, lawsuits, contracts, intellectual property, licenses, KVKK compliance, environmental compliance, etc.,
• Financial due diligence: Financial statements, tax status, receivable/debt status, bank relations,
• Operational due diligence: Workforce, production, customer relations, suppliers,
• Tax due diligence: Retroactive tax risks.

Due diligence reports are determinative in negotiating sale price and shaping contract provisions.

Step 3: Share Purchase Agreement (SPA)

The central document of transaction. In SPA:

• Shares to be sold, price, payment terms,
• Representations and Warranties — assurances seller gives about company,
• Indemnity — compensation obligation if representations prove false,
• Pre-closing conditions — regulatory approvals, third-party consents,
• Waiting period and closing procedure,
• Exit (post-closing) obligations

are regulated in detail. SPA often runs to hundreds of pages.

Step 4: Regulatory Approvals

Some transactions require additional approvals:

• Competition Authority approval — in transactions exceeding specific turnover thresholds,
• Sectoral regulator approvals — banking, insurance, telecommunications, energy,
• Foreign investment approval — in strategic sectors.

For tourism investments in Antalya, additional approvals are generally not required; however, transfer of incentivised investments is regulated by special rules.

Step 5: Closing

Upon fulfilment of all conditions, transaction is completed with closing:

• Share transfer transaction is executed,
• Money transfer made,
• Board members changed,
• Required registration transactions made at Trade Registry,
• Bank authorities updated.

Step 6: Post-Closing Integration

After transaction closes:

• Operational integration is conducted,
• Employees are integrated into the new structure,
• Financial systems combined,
• KPIs and performance tracking conducted.

Managing Risks Found in Due Diligence

Various mechanisms are used to manage risks identified during due diligence:

Price Reduction

Discount on sale price is made for identified risks.

Escrow

Part of sale price is held at a bank or third party for specific period (escrow). Compensation for problems identified during this period can be drawn from this amount.

Indemnity

Contractual provisions providing seller will pay buyer compensation if specific risks materialise.

W&I Insurance

Warranties & Indemnities Insurance — insurance against breaches in contract's representations and warranties. Still little used in Turkey but referenced tool in large transactions.

Employee Relations

In M&A transaction, employees' situation is critical issue:

• In share sale, employees automatically continue; their contracts don't change,
• In asset sale, employee transfer is done within labour law rules,
• Employees should be informed, their rights protected,
• Special provisions are arranged in contract for severance, premium, and additional rights.

Tax Optimisation

Tax planning can save significantly in M&A transactions:

• Corporate tax exemption — in specific mergers,
• Capital gains exemption — depending on conditions,
• Full taxpayer vs. limited taxpayer company structuring.

Tax structuring significantly affects net effect of sale price; involving accountant in process from start is essential.

Legal Support

In Antalya, for company acquisition, sale, merger, and demerger transactions, MONA HUKUK provides professional support in due diligence, contract negotiation, regulatory approvals, and post-closing integration processes. Since M&A transactions are strategic decisions, presence of experienced legal team in negotiation and risk management is determinative for transaction's success.

Contact us at contact@monahukuk.com or call +90 (242) 606 14 32 to schedule a consultation in Antalya.