SECTION 1: Market overview
1.1 What have been the key trends in the M&A market in
your jurisdiction over the past 12 months and what have been
the most active sectors?
The Annual Turkish M&A Review 2017 by Deloitte reports
that around 298 transactions were realized in 2017 with a total
value of $10.3 billion. Leading sectors for the M&A market
in 2017 were the technology, internet and energy sectors. While
the internet and technology sectors hosted the deal activity in
terms of deal number, the energy sector was leading in terms of
deal value. European investors were the most active buyers and
took part in 36 transactions and represented 55% of the foreign
investors' annual deal volume.
1.2 What M&A deal flow has your market experienced and
how does this compare to previous years?
M&A value increased significantly by 41% compared to
2016. The total deal number reached an all-time high with an
increase of 21%.
1.3 Is your market driven by private or public M&A
transactions, or both? What are the dynamics between the
The market has been dominated by private M&A
transactions in 2017 similar to 2016. Fourteen privatisations
at the total value of $700 million were completed in the
energy, infrastructure, chemicals and mining sectors, while
private transactions had a total value of $9.6 billion.
Privatisations corresponded to 7% of the total transaction
1.4 Describe the relative influence of strategic and
financial investors on the M&A environment in your
The Annual Turkish M&A Review 2017 by Deloitte reports
that total deal volume generated by financial investors stood
at $2.6 billion, private equity was involved in 20 acquisitions
in 2017 corresponding to $2.15 billion and 12 exits took place,
mostly to strategic investors in entertainment, manufacturing,
food and beverage and education sectors through sales to
strategic or financial sponsors and public offerings.
SECTION 2: M&A structures
2.1 Please review some recent notable M&A transactions
in your market and outline any interesting aspects in their
structures and what they mean for the market.
The acquisition of Mersin Uluslararası Liman
İşletmeciliği was one of the most significant
deals due to the deal value and the fact that it was the
largest financial investor transaction of the year in
2.2 What have been the most significant trends or factors
impacting deal structures?
IPOs are expected to increase significantly in 2018.
Additionally, locked box and earn-out mechanisms are common in
M&A transactions where buyers are cautious.
SECTION 3: Legislation and policy changes
3.1 Describe the key legislation and regulatory bodies that
govern M&A activity in your jurisdiction.
The key legislation governing M&A activity is the
Turkish Commercial Code No. 6102, published in the Official
Gazette dated February 14 2011 and numbered 27846 (Turkish
Commercial Code) for privately held companies; and the Capital
Markets Law numbered 6362, published in the Official Gazette
dated December 30 2012 and numbered 28513 (Capital Markets Law)
for the public companies.
The Law on Protection of Competition No. 4054, published in
the Official Gazette dated December 13 1994 and numbered 22140
also governs certain M&A transactions depending on volume
of transactions and the dominance of the parties involved.
Accordingly, certain transactions regulated under the
Communique on Mergers and Acquisitions are subject to the
clearance of the Turkish Competition Authority No. 2010/4.
In this regard, depending on the sector involved in the
transactions, approvals of different regulatory bodies would be
3.2 Have there been any recent changes to regulations or
regulators that may impact M&A transactions or activity and
what impact do you expect them to have?
Capital markets regulation concerning crowd funding is
legislated in 2017. Such alternative financing method is
expected to activate the market for start-ups.
3.3 Are there any rules, legislation or policy frameworks
under discussion that may impact M&A in your jurisdiction
in the near future?
An amendment concerning the Law on Enforcement and
Bankruptcy No. 2004 is expected to be introduced in 2018 with
respect to bankruptcy and debt restructuring
(konkordato) procedures. Additionally, various
incentive packages for investors are expected to be granted
similar to recent years.
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the M&A market in your jurisdiction.
|NB: Values may exclude
certain transactions, for example asset
The discrepancies between common law and civil law give rise
to various misconceptions in the Turkish M&A market. The
use of some boiler plate provisions of Turkish law (such as
good faith and fair dealing, frustration or force
majeure) in an English law governed agreement creates
problems of interpretation.
4.2 Are there frequently asked questions or often
overlooked areas from parties involved in an M&A
Usually, dispute resolution is overlooked during the
negotiation of deals. Consequently, in the event of a dispute
between the parties, the delay in the decision-making process
of the courts causes parties to face additional financial
Competition requirements and administrative requirements,
such as workplace opening and operating licence and additional
benefits granted to employees of target companies, are usually
4.3 What measures should be taken to best prepare for your
The abovementioned idiosyncrasies may be handled through
obtaining well-experienced legal consultancy services.
Choice of arbitration as a means of dispute resolution
between parties may be suggested in order to resolve such
disputes diligently and eliminate the risk of financial losses
arising from disputes.
Turkish legislation allows international arbitration in the
event that the dispute involves a foreign element (such as
having the business places or habitual residences in different
states, or one of the parties having a foreign shareholder
bringing foreign investment or the disputed contractual
relationship creates a flow of investment from one country to
another). Turkey is party to the New York Convention and
foreign arbitral awards are enforceable in Turkey in accordance
with the New York Convention. As regards the enforcement
procedure, Turkey is an arbitration-friendly country.
SECTION 5(a): Public M&A
5.1 What are the key factors involved in obtaining control
of a public company in your jurisdiction?
The main legislative text governing public companies is the
Capital Markets Law. According to the Capital Markets Law,
public companies which either have more than 500 shareholders
or are publicly traded are joint stock companies.
Pursuant to Article 12 of the Communiqué on Takeover
Bids No. II-26.1, published in the Official Gazette no 28891
dated January 23 2014 (Communiqué on Takeover Bids)
issued by the Capital Markets Board, control is defined as
holding either or both of: over 50% of the voting rights of a
corporation directly or indirectly; and/or privileged shares
enabling their holder to appoint the simple majority of the
members of the board of directors or to nominate such majority
of directors in the general assembly meeting.
5.2 What conditions are usually attached to a public
Pursuant to Article 11(4) of the Communiqué on
Takeover Bids, a mandatory takeover bid cannot be subject to
any conditions. However, under Article 20 of the
Communiqué on Takeover Bid, a voluntary takeover bid may
be submitted for all or some of shares of a publicly held
corporation. If a voluntary takeover bid is submitted for some
of the shares and the number of shares covered by the demands
for participation in the takeover bid is greater than the
number of shares covered by the takeover bid, then the
voluntary takeover bid process is conducted in accordance to a
pro rata distribution method; in order to eliminate
any inequality between the demanding shareholders. Since the
form to be submitted to the Capital Markets Board requires the
bidder to submit information on the conditions of a bid, it is
implied that certain restrictions may be imposed on voluntary
takeover bids upon the approval of the Capital Markets
Furthermore, under the Communiqué on Material Events
Disclosure No. II-15.1 published in the Official Gazette dated
January 23 2014 and numbered 28891, tender offers and public
takeovers are subject to certain disclosure requirements.
It is also noteworthy that following the enactment of Law
No. 6728, a 10% threshold has been determined for purposes of
defining a related party with regards to transfer pricing
requirements. In the meantime, the threshold for the rate of
shareholding that can be subject to buyback by a company with
regards to its own shares is 10%, under the Turkish Commercial
5.3 What are the current trends/market standards for break
fees in public M&A in your jurisdiction?
There is no specific regulation as per break fees under the
capital markets legislation. Therefore, the Turkish Code of
Obligations, numbered 6098 published in the Official Gazette
dated February 4 2011 and numbered 27836 (TCO), will be
applicable. There is no restriction with regards to a break
fees under the TCO between merchants.
Especially in private deals, where the target is sold by
means of a tender, break fees are frequently used for violation
of exclusivity or lack of closing, for instance unsuccessful
tenders. However, break fees are not very commonly seen for
public M&A deals.
SECTION 5(b): Private M&A
5.4 What are the current trends with regard to
consideration mechanisms including the use of locked box
mechanisms, completion accounts, earn-outs and escrow?
As per the Turkish private M&A markets, purchase price
adjustments have been the most popular mechanism for pricing
Recently, the locked box mechanism was offered by a greater
number of sellers, where a correspondingly increasing number of
buyers accepted such alternative consideration mechanism.
On the other hand, the earn-out method was not as commonly
resorted to as the aforementioned and used generally for
partial share acquisitions where one of the parties maintains
its presence in the target.
Finally, an escrow mechanism has been seldom come across in
the Turkish M&A market, since Turkish banks are not very
enthusiastic about the application of such a mechanism and its
5.5 What conditions are usually attached to a private
The most used conditions precedents for a private takeover
offer are regulatory authority clearances and approvals from
regulatory authorities. Among these clearances and approvals,
the most ubiquitous condition precedent is merger clearance to
from the Turkish Competition Authority. There might also be
regulatory authority clearances required from other regulatory
authorities, such as the Energy Market Regulatory Authority and
Information and Communication Technologies Authority designated
as conditions precedent depending of the activities of the
Another often used type of condition precedent is the
approval or consent of third parties, where a change of control
clause requires such approval or consent, with regard to the
contracts, where the buyer will become a party. In relation to
such consent / approval, if the target company holds certain
licences or permits, such as an electricity distribution
licence, approval must be obtained for certain changes in the
shareholding structure of the licence-holder target
Among other examples of conditions precedents are the
resignation of the current board structure of the target and
its replacement with new members appointed by the buyer;
undertakings with regard to the post-signing and pre-closing
interim period; disclosure of transactions out of ordinary
course of business during such interim period; transfer of loan
agreements and the security agreements in connection with such
loans; exclusivity and break fee with regard to such
exclusivity and non-occurrence of material adverse events.
5.6 Is it common practice to provide for a foreign
governing law and/or jurisdiction in private M&A share
Under Turkish law, parties to an agreement with a foreign
element can choose the governing law for the agreement. Choice
of Turkish law as governing law for Turkish target companies is
general market practice. However, during the recent years, it
has been more frequently seen that a foreign, non-Turkish,
jurisdiction was designated as the governing law in order to
eliminate the difficulties of recognition and enforceability of
court decisions. In addition, arbitration became more
preferable as the means of dispute resolution, including both
international commercial arbitration, such as ICC and Uncitral
arbitration, and arbitration by the recently established
Istanbul Arbitration Centre.
5.7 How common is warranty and indemnity insurance on
private M&A transactions?
Professional liability insurance and director's and
officer's liability insurance is available under the Turkish
Commercial Code. However, warranty and indemnity (W&I)
insurance is not available under Turkish law.
5.8 Discuss the exit environment in your jurisdiction,
including the market for IPOs, trade sales and sales to
IPOs are the most common exit strategy foreseen for the
transactions in which financial investors are involved.
Additionally, option agreements are common. However,
enforceability of option agreements under Turkish law is quite
SECTION 6: Outlook 2018
6.1 What are your predictions for the next 12 months in the
M&A market and how do you expect legal practice to
Almost 20 public offerings are expected to be realised in
2018. The privatisation of Eskişehir coal reserve field
and renewable energy resource projects are likely to bring
significant activity to the energy sector in 2018.
Additionally, 14 sugar refineries are expected to be
Founder and senior partner, Erdem &
Erdem Law Office
T: +90 212 291 73 83
F: +90 212 291 73 82
Professor Dr H Ercüment Erdem is the founder
and senior partner of Erdem & Erdem. He has more
than 30 years of experience in M&A, international
commercial law, privatisations, corporate finance and
arbitration. He serves international and national
clients in a variety of industries including energy,
construction, finance, retail, real estate, aerospace,
healthcare and insurance.
Erdem is a member of Istanbul Bar Association, the
co-chair of the ICC Commercial Law and Practice
Commission and a member of the ICC Court of
Arbitration, ICC Institute Council, ICC Incoterms
Expert Group, and ICC Turkish National Committee
Arbitration Council, as well as a member of several ICC
task forces. He is a member of the Association Suisse
de l'Arbitrage (ASA), International Bar Association
(IBA), Association Henri Capitant des amis de la
culture juridique française, and the Research
Institute of Banking and Commercial Law.
Erdem has strong academic background. He is an
emeritus professor and still continues to lecture in
leading universities such as Galatasaray University,
Turkey and Fribourg University, Switzerland. He has
authored books on M&A, international trade law,
competition law, commercial law, CIF sales etc. In
addition, he has authored numerous articles in national
or international publications related to commercial
law, competition and antitrust law, contracts law,
arbitration, complex business litigation issues,
dispute resolution etc.
Partner – head of corporate,
Erdem & Erdem Law Office
T: +90 212 291 73 83
F: +90 212 291 73 82
Özgür Kocabaşoğlu is a partner
and the head of corporate of Erdem & Erdem Law
Office. Kocabaşoğlu has nearly 20 years of
experience in national and multijurisdictional complex
M&A, structuring, banking, capital markets
transactions, corporate and project finance.
He has extensive experience of international
transactions involving a number of overseas
jurisdictions in a variety of business sectors
including energy, mining, transportation, ports,
airports, construction, finance, retail and real
He focuses on privatisations and public private
partnership models and complex cross-border
transactions involving commercial banks, corporate
entities, public and private companies.
In recent years, he has led M&A deals in a wide
geography including Europe, Latin America, Russia, CIS
countries, Africa and Asia. Moreover, he regularly
provides consultancy to multinational corporations on
every aspect of commercial law, contract law, capital
markets and merger and acquisitions.
He is a member of Istanbul Bar Association and
International Bar Association (IBA).