The Annual Turkish M&A Review 2019, produced by
Deloitte, reports that around 233 transactions were closed in
2019, with a total value of $5.3 billion. Technology, internet
and mobile services, and energy were the leading sectors for
the M&A market in 2019. While the infrastructure sector
hosted the highest level of deal volume, the technology sector
led in terms of numbers. Investors from the US were the most
active foreign investors in terms of the deal numbers (10),
while investors from China dominated the sector in terms of
disclosed deal values, accounting for 31% of total value. Also,
although 2019 remained at the bottom in the last 15 years in
terms of transaction volume, interest from investors based in
the US, Europe and Japan increased, as opposed to the dominant
presence of Gulf region investors in previous years.
Although there has been a slight drop in the value of
M&A deals, the number of deals was stable in 2019. As with
2018, mostly small and mid-sized transactions were closed in
2019, as 171 out of 233 were estimated or disclosed to have had
a value of less than $10 million. Involvement by foreign
investors in the deal volume was higher than the average of the
last decade, at 64%, while the annual deal number remained
flat. After a relatively slow year in 2019, an increase in deal
activity is highly anticipated.
As with previous years, the M&A market mostly hosted
private M&A transactions in 2019. Only two privatisation
deals were closed in 2019. In both deals, the revenue sharing
model was adopted so no deal value exists.
Warranty and indemnity (W&I) insurance is a developing
trend in private M&A transactions. Although the use of
W&I insurance remains limited in the Turkish M&A
market, we anticipate that its use will increase in line with
Private equity deal activity has remained relatively low,
with financial investors involved in 37% of deals. Private
equity deals predominantly feature venture capital firms and
angel investors, alongside private equity-backed deals. Private
equity and venture capital investment decreased in 2019.
In recent years, concern has increased over the effects of
fluctuations in the national economy and changes in the value
of the Turkish lira against foreign currencies. Additionally,
certain conditions with respect to sanctions are frequently
discussed during negotiations for M&A transactions. We
believe that sanction-related terms will become more common and
that some new mechanisms may be adopted under the agreements in
LEGISLATION AND POLICY CHANGES
For private M&A, the Turkish Commercial Code No. 6102
(Official Gazette February 14 2011 No. 27846) is a key piece of
legislation governing privately held companies. For public
acquisitions, the Capital Markets Law No. 6362 (Official
Gazette December 6 2012 No. 28513) provides the key framework.
For both privately held and public companies, the Law on
Protection of Competition No. 4054 (Official Gazette December
13 1994 No. 22140) requires that the Turkish Competition Board
authorises transactions when they result in a change of control
and when the revenues of the transaction parties exceed certain
thresholds. As a secondary piece of legislation, the Communique
on Mergers and Acquisitions by the Turkish Competition
Authority No. 2010/4 specifies the requirements and
Moreover, on a sectoral basis, transactions may require
approvals from different regulatory bodies, such as the Energy
Market Regulatory Authority.
The Regulation regarding Mandatory Mediation in Commercial
Disputes entered into force in 2019. Accordingly, mediation
before initiating a lawsuit is now a pre-condition in
commercial cases where there are claims for receivables and
compensation – where the subject matter of the
commercial dispute is the payment of a certain amount of
The Communiqué on Equity Based Crowdfunding also
entered into force in 2019. The main purpose of the
Communiqué is to regulate the procedures and principles
for equity-based crowdfunding and the listing of crowdfunding
platforms and their activities, and to control and audit of the
funds so they are used in line with the specified purposes.
Only crowdfunding that is based on equity is regulated under
the Communiqué, and donations and reward-based
crowdfunding models do not fall under its scope.
The Communiqué on the Principles on Abolishment of
the Privileges of Voting Rights and Representation on the Board
of Directors numbered II-28.1 also entered into force in 2019.
The Communiqué regulates procedures and principles on
the abolishment of the privileges as to voting rights and
representation on the board of directors in publicly held
companies through the decision of the Capital Markets Board in
the event of a loss incurred for five consecutive years
according to its financial statements.
Certain amendments were also introduced to the Payment and
Securities Settlement Systems, Payment Services and E-Money
Institutions through Law No. 7192, with major implications for
settlement systems. Most of the powers and obligations granted
to the Banking Supervision and Regulation Board under the
Payment and Securities Settlement Systems, Payment Services,
and Electronic Money Institutions Code have been transferred to
the Turkish Central Bank.
Looking ahead, an amendment proposal for public companies
has been put before the legislature. The proposal could impact
M&A transactions with respect to takeover bids. It adopts
the fair price basis for bids and proposes a bid structure akin
to a priority right or pre-emption right. It is notable that
the legislative proposal includes material amendments in both
As Turkey is a civil law country, different implications
under civil and common law systems may cause incongruities.
When the parties include typical Turkish law provisions, such
as good faith and fair dealing, frustration or force
majeure provisions to the English law-governed contracts,
misinterpretation can be a problem.
One of the most overlooked issues in the Turkish market is
the legal necessity for Turkish commercial enterprises to use
the Turkish language. This goes back to Law No. 805 on the
Mandatory Use of the Turkish Language in Commercial
Enterprises, which was legislated in 1926. Decisions by The
Turkish Court of Cassation have also extended this requirement
to arbitration agreements, stating that a Turkish party may not
be allowed to base its jurisdictional objection on an
arbitration agreement drafted in a language other than Turkish.
Similarly, through its decisions the Court of Cassation
expanded the scope of Law No. 805; however, the market has so
far assumed that this obligation is not applicable to
transactions that involve a foreign party.
Parties sometimes also overlook dispute resolution while
negotiating deals. Losing time between the emergence of a
dispute and the Court's final decision on a dispute can cause
parties to incur financial losses.
In terms of legal practice norms, technologies that
facilitate the M&A deal-making processes, such as
artificial intelligence software, are still not commonly used
Under Turkish law, if a joint stock company has more than
500 shareholders, or if its shares are traded publicly, then it
is regarded as a public company. The Capital Markets Law is the
key legislative text for public company acquisitions.
The concept of control is defined as either: (i) direct or
indirect, holding more than 50% of the voting rights of a
company; or (ii) holding privileged shares that enable the
shareholder to appoint the simple majority of its board of
directors, or to nominate the majority of the directors in the
general assembly, pursuant to Article 12 of Communiqué
on Takeover Bids No. II-26.1 (Official Gazette No. 28891 of
January 23 2014).
Under Article 11(4) of the abovementioned Communique, and
unlike in voluntary takeover bids, conditions attached to
mandatory takeover bids are not allowed (whereas voluntary bids
may be submitted to a group of, or all, the shareholders). When
submitted for a part of the shares, if the participation demand
exceeds the bid, then the pro rata distribution method will be
applied to balance the difference between the demand and the
voluntary bid. Further restrictions may be imposed on voluntary
takeover bids following the approval of the Capital Markets
Board, since the application requires the bidder to submit
certain information as to the conditions of a bid. There are
also disclosure requirements for tender offers and public
takeovers detailed in the Communiqué on Material Events
Disclosure No. II-15.1 (Official Gazette, January 23, 2014, No.
As there is no particular provision under the Capital
Markets Law regime regarding break fees. The Turkish Code of
Obligations No. 6098 (Official Gazette, February 4 2011, No.
27836) will apply as the lex generalis on contracts.
If a transaction is made via a tender offer, break fees serve
as a deterrent against a breach of exclusivity or of
non-occurrence of closing. Although break fees are not common
in public M&A deals, under the Turkish Code of Obligations,
there is no restriction on break fees in terms of transactions
Over 2019 the Turkish private M&A market was driven by
buyers. Purchase price adjustments have been, once again, the
most popular mechanism for pricing and payment. The earn-out
method and locked-box mechanisms have not been commonly
Economic fluctuations experienced during the previous years
have encouraged parties to employ certain calculations in
M&A deals: both sellers and buyers aim to maximise
certainty, especially where M&A projects are financed
through external loans, or where the share purchase price is
agreed to in a foreign currency. Accordingly, certain specific
conditions with respect to the economic situation have been
more frequently included in agreements as a material adverse
effect, force majeure, or other similar concepts.
Other common conditions precedent for private takeover
offers are regulatory authority clearances and third-party
change of control approvals. Among these, the most ubiquitous
condition precedent is merger clearance from the Turkish
Competition Authority. Additionally, if the target company
holds certain licences or permits, approval must be obtained
for changes in the shareholding structure of the licence-holder
It is common to choose a foreign governing law in the
Turkish market. In the M&A sector, it is more common for
parties to choose Turkish law as the governing law where the
target is a Turkish company. However, most of the time, parties
prefer to choose a different governing law in M&A projects
for secondary agreements, as much as the mandatory provisions
allow, and where enforceability is not endangered. Furthermore,
arbitration becomes a more popular choice each day.
IPOs continue to be one of the most common exit strategies
for financial investors. One of the biggest recent M&A
deals in terms of value was in fact a financial sponsor exit.
The deal saw the European Bank of Reconstruction and
Development (EBRD) sell its shares in Pasabahce, the largest
glassware company in Turkey with both domestic and global
businesses, to its parent, which previously held approximately
85% of the shares of the company. Through the deal, Pasabahce's
parent acquired approximately 15% of the shares.
An increase in M&A is expected in 2020. The Turkish
M&A market maintains its advantageous nature for both
long-term and short-term investors as a result of a promising
economic recovery and the opportunities that reside in the
developing character of the market.
H Ercüment Erdem
Founder and senior partner, Erdem &
Erdem Law Office
T: +90 212 291 73 83
Ercüment Erdem is the founder and senior
partner of Erdem & Erdem. He has approximately 35
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.
Ercüment is a member of the Istanbul Bar
Association and International Bar Association (IBA). He
is 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
Ercüment has a strong academic background. He
is an emeritus professor and continues to lecture in
leading universities including Galatasaray University,
Turkey, and Fribourg University, Switzerland. He has
authored books on M&A, international trade law,
competition law, commercial law and CIF sales, among
other topics. He has also authored numerous articles in
national and international publications related to
commercial law, competition and antitrust law,
contracts law, arbitration, complex business litigation
issues and dispute resolution. He has been selected as
an Expert Consultant in M&A by the IFLR1000.
Partner and head of corporate, Erdem &
Erdem Law Office
T: +90 212 291 73 83
Özgür Kocabaşoğlu is a partner
and the head of the corporate department of Erdem &
Erdem. Özgür has 20 years of experience in
national and multijurisdictional complex M&A
structuring, banking, capital markets transactions and
corporate and project finance.
He has extensive experience in international
transactions involving several overseas jurisdictions
in a variety of business sectors, including energy,
mining, transportation, ports, airports, construction,
finance, retail and real estate. He focuses on
privatizations, public private partnership (PPP) models
and complex cross-border transactions involving
commercial banks, corporate entities, and public and
In recent years, he has led M&A deals in Europe,
Latin America, Russia, CIS countries, Africa and Asia.
Moreover, he regularly provides consultancy services to
multinational corporations on every aspect of
commercial law, contract law, capital markets, and
mergers and acquisitions.
He is a member of the Istanbul Bar Association and
International Bar Association (IBA). He is listed as
Notable Practitioner in M&A by IFLR1000.