Serdar Paksoy of Paksoy assesses the regulatory landscape for mergers and acquisitions in Turkey


1.1 What legislation and regulatory bodies govern public M&A activity in your jurisdiction?

The Capital Markets Law is the primary legislation governing public companies. The Turkish Commercial Code also applies to public M&A, as well as secondary legislation issued by the Capital Markets Board (CMB), such as the communiqués on mergers and spin-offs and on tender offers. The merger control communiqué will also apply to public M&A transactions, resulting in a change of control if the parties' turnovers exceed certain thresholds.

The CMB is responsible for administering and enforcing the Capital Markets Law and regulations; the merger control process is supervised by the Competition Board (CB).

1.2 How, by whom, and by what measures, are takeover regulations (or equivalent) enforced?

Takeover rules are regulated and supervised by the CMB, which is authorised to make investigations, request information and apply sanctions for non-compliance. CMB decisions can be appealed to administrative courts.


2.1 What are the basic structures for friendly and hostile acquisitions?

There is no differentiation in structures between friendly and hostile acquisitions; both are subject to the same rules. Hostile takeovers are not common in Turkey because most Turkish public companies are controlled by a single shareholder or a small group of shareholders with absolute majority. As a result, management control usually rests with the majority or controlling shareholder.

In friendly acquisitions, deal structures can be flexible and in the form of: over-the-counter purchases; placements in the wholesale market of Borsa Istanbul (Turkey's stock exchange) to specified investors; competitive bidding resulting in a share purchase or share subscription; or mergers or spin-offs (de-mergers).

2.2 What determines the choice of structure, including in the case of a cross-border deal?

The bidder freely determines the structure in voluntary offers, usually based on commercial negotiations with the controlling shareholder. Mergers are not generally feasible in cross-border deals.

2.3 How quickly can a bidder complete an acquisition? How long is the deal open to competing bids?

In voluntary tender offers, the bidder can complete an acquisition in approximately one to two months depending on the CMB's approval process. Merger clearance and other regulatory approvals must be obtained before the CMB approval. The offer must be initiated by the bidder within six business days of the CMB's approval and the offer period cannot be less than 10 or more than 20 business days. The voluntary offer is open to competing bids until one business day before the end of the offer period; if the initial offer period is less than the competing offer period, it may be extended until the end of the competing offer period. Those shareholders accepting the initial offer before announcement of the competing bid that have not yet completed the sale may withdraw their acceptance.

For mandatory tender offers (MTO), an application must be filed with the CMB within six business days of the acquisition of control, and the offer must be launched within two months of the acquisition. The offer period cannot be less than 10 or more than 20 business days.

2.4 Are there restrictions on the price offered or its form (cash or shares)?

There are no restrictions on the price or its form in voluntary tender offers. Bidders are free to increase the offer price and extend the scope of the offer (that is, targeting all of the shareholders) until one business day before the end of the offer period, in which case the offer period is extended by two weeks.

As consideration in MTOs, bidders can offer cash or, provided that the shareholders' written consent is obtained, listed shares (or a combination of both). The offer price cannot be less than the highest price paid by the bidder for the same class of shares within the six month period preceding the offer date, including the price paid to the seller in the acquisition triggering the bid. If the target is a listed company, the offer price must not be less than the arithmetic average of the adjusted daily weighted average market price of the shares within the six month period preceding the public disclosure of the share purchase agreement leading to the acquisition of management control.

Price adjustments, earn-outs, and other similar elements that increase the original purchase price paid to the seller are taken into account in determining the price.

Similar restrictions apply if an indirect change of control in the target triggers the offer.

2.5 What level of acceptance/ownership and other conditions determine whether the acquisition proceeds and can satisfactorily squeeze out or otherwise eliminate minority shareholders?

No specific acceptance or ownership thresholds or other conditions exist to proceed with an acquisition, although controlling shareholders do have certain squeeze-out rights.

In acquisitions, shareholders or a group of shareholders acting in concert holding at least 98% of the total voting rights of a public company may squeeze out the minorities provided that they first offer minorities the right to sell their shares. However, the threshold applied is 97% until December 31 2017, and squeeze-outs can be triggered when the controlling shareholders' ownership reaches the threshold, or controlling shareholders already holding 97% of voting rights buy additional shares. For mergers, a controlling shareholder holding at least 95% of voting rights may squeeze out the minorities upon meeting certain conditions and with CMB approval.

2.6 Do minority shareholders enjoy protections against the payment of control premiums, other preferential pricing for selected shareholders, and partial acquisitions, for example by mandatory offer requirements, ownership disclosure obligations and a best price/all holders rule?

If the acquisition results in the bidder (or persons acting in concert) obtaining, directly or indirectly, management control of a company, MTO rules are triggered and a general offer must be made to the remaining shareholders. The MTO would have to be in the form of an acquisition of shares for payment in cash, an exchange for listed shares or a combination of both. Price restrictions in MTOs provide significant protection for minorities. All shareholders holding the same class of shares must be afforded equivalent treatment by the bidder. Based on this equal treatment principle, the majority cannot be offered forms of consideration that are not available to minorities.

If as a result of an acquisition, a person's direct or indirect shareholding or voting rights in a public company exceeds or falls below five percent, 10%, 15%, 20%, 25%, one third, 50%, two thirds and 75%, disclosure must be made to the public.

2.7 To what extent can buyers make conditional offers, for example subject to financing, absence of material adverse changes or truth of representations? Are bank guarantees or certain funding of the purchase price required?

There are no express restrictions applicable to voluntary tender offers other than for financing. All offers, including conditional offers, are subject to CMB approval. The CMB may either accept or reject a condition. Regardless, all bidders are required to secure financing prior to the CMB application; and the CMB may request guarantees. MTOs cannot be conditional.


3.1 What are the basic tax considerations and trade-offs?

There are no specific tax considerations nor are there significant tax related trade-offs in public M&A transactions. Capital gains arising from the sale of a public company's shares, other than securities investment trust shares, are subject to withholding tax, but the rate is zero percent. If a share purchase agreement is executed, stamp duty may be due for each original copy of the agreement at a rate of 0.948% (for 2015) over the highest monetary undertaking, capped at approximately TL1.7 million ($654,000).

3.2 Are there special considerations in cross-border deals?

The same withholding tax and stamp duty rules applicable to domestic deals also apply in cross-border deals. Additionally, Turkish-sourced dividend income derived by non-residents is subject to a 15% withholding tax. Certain exceptions exist based on bilateral treaties.


4.1 What are the most important forms of anti-takeover defences and are there any restrictions on their use?

Anti-takeover defences are not specifically regulated in Turkey.

A target company's management has fiduciary duties to its shareholders and should at all times act in the best interest of the company; therefore, if management attempts to jeopardise an offer based on personal gain, it may be liable for damages to shareholders.

4.2 How do targets use anti-takeover defences?

There is no precedent for anti-takeover defences. In voluntary tender offers, a target's board is required to prepare and announce a report on the offer features and the prospects of the acquisition of the target, which could be used to convince shareholders to decline an offer. Alternatively, management can try to obtain additional time from the CMB to call a shareholders' meeting, where it can promote competing offers. Antitrust concerns may also be used as a defence (see section 6).

4.3 Is a target required to provide due diligence information to a potential bidder?

A target is not required to provide due diligence information to a potential bidder. If the controlling shareholder is in favour of the bid, the target may agree on providing due diligence information. Otherwise, as most managements in Turkish public entities are controlled by a single shareholder group, bidders' due diligence requests would be rejected.

4.4 How do bidders overcome anti-takeover defences?

Bidders can challenge a target's actions before a court if there are sufficient legal grounds. They may also try to overcome anti-takeover defences by increasing the price.

4.5 Are there many examples of successful hostile acquisitions?



5.1 What are the main ways for a friendly bidder and target to protect a friendly deal from a hostile interloper?

There are no regulated protection mechanisms. The initial bidder may try competing with the hostile interloper by increasing the price.

5.2 To what extent are deal protections prevented, for example by restrictions on impediments to competing bidders, break fees or lock-up agreements?

There are no regulations or precedents.


6.1 What are the antitrust notification thresholds in your jurisdiction?

The notification thresholds applicable to M&A resulting in a change of control are:

the parties' combined turnover in Turkey exceeds TL100 million and at least two of the parties' turnover in Turkey individually exceeds TL30 million; or
the Turkish turnover of the acquisition target, or at least one transaction party in a merger, exceeds TL30 million ($12.5 million) and the worldwide turnover of at least one other transaction party exceeds TL500 million ($208 million).

6.2 When will transactions falling below those thresholds be investigated?

There is no ex-officio investigation, but the CB has the power to investigate transactions creating a dominant position and significantly restricting competition in any relevant market in Turkey, even if the thresholds are not met. There are, however, no precedents to this.

6.3 Is an antitrust notification filing mandatory or voluntary?

Antitrust filing is mandatory for transactions resulting in a change of control that meet any of the thresholds set out in section 6.1.

6.4 What are the deadlines for filing, and what are the penalties for not filing?

There are no deadlines for filing, but the transaction cannot be completed without obtaining prior approval.

6.5 How long are the antitrust review periods?

The statutory review period is 30 days from the filing date, but for transactions leading to dominance concerns, the CB may at the end of the initial phase decide to launch an in-depth review. Such review may take up to six months or more, if necessary.

6.6 At what level does your antitrust authority have jurisdiction to review and impose penalties for failure to notify deals that do not have local competition effect?

Even if the transaction does not raise local competition concerns, if the above thresholds are met, it will be subject to CB approval. Failure to make an antitrust filing or completing a transaction without receiving CB approval may result in a fixed fine at a rate equal to 0.1% of the parties' turnovers in Turkey in the preceding financial year. The fine is applied to bidders in the case of acquisitions and to both parties in a merger or formation of a joint venture.

6.7 What other regulatory or related obstacles do bidders face, including national security or protected industry review, foreign ownership restrictions, employment regulation and other governmental regulation?

Bidders face certain industry-specific restrictions, such as a limitation on foreign shareholding and management control in broadcasting, aviation and telecommunication entities, and on indirect ownership of real estate in national security areas.


7.1 What is the applicable anti-corruption legislation in your jurisdiction?

The Turkish Criminal Code is the main piece of legislation applicable to corruption, including bribery, fraud and embezzlement. Bribery is defined as providing a benefit to public officials so that they act or refrain from acting in the exercise of their duties, regardless of whether there is a mutual understanding between the parties. The definition of public official covers any person elected, appointed or chosen to carry out a public duty. Bribery of foreign public officials is also penalised.

There is no criminal liability for legal entities under the Criminal Code, but the Law on Misdemeanours provides sanctions on legal entities if they unjustly benefit from the bribery.

The Law on Public Officers, the Law on Declaration of Property and Fight against Bribery and Corruption and the Law on Prevention of Laundering Proceeds of Crime also apply to corruption cases.

7.2 What are the potential sanctions and how stringently have they been enforced?

For bribery, both the party making a bribe and the recipient are penalised with four to 12 years' imprisonment, which may be reduced by half if the bribe was offered but not accepted. Penalties for fraud and embezzlement are imprisonment for one to five years and five to 12 years, respectively. Additional sanctions may also apply, including administrative fines, revocation of licences and seizure of goods.


8.1 Are there any other material issues in your jurisdiction that might affect a public M&A transaction?

If the target is active in a regulated sector, approval of that sector's regulator may be required before an acquisition.

8.2 What are the key recent M&A developments in your jurisdiction?

Secondary legislation is still being passed in Turkey following the enactment of the new Capital Markets Law in December 2012. A new CMB communiqué on sell-outs and squeeze-outs was published in November 2014, with certain market players taking advantage of this regulation. The Communiqué on tender offers was partly amended by the CMB on February 27 2015.


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Serdar Paksoy

About the author

Serdar Paksoy is the founding and senior partner of the Paksoy. He focusses on mergers and acquisitions, private equity, corporate governance, banking regulation, securities law and dispute resolution and investigations. For more than 25 years, he has been regularly advising foreign investors on deals in Turkey in the financial services, banking, insurance, energy, retail, manufacturing, media, and infrastructure sectors.