The Acquisition and Leveraged Finance Review: Turkey


In 2020, M&A activity in Turkey saw an all-time high, at least in the number of deals. According to market data,2 304 transactions totalling US$9 billion were recorded in Turkey. Compared to the previous year, which showed a sharp decrease in deal value and a moderate decrease in the number of deals compared to previous years, the number of deals increased from 233 to 304, while the total deal value increased from US$5.3 billion to US$9 billion in 2020. However, deal value in 2020 was still behind the past 15 years' highest deal value, which was US$22 billion in 2012.

Share acquisitions are the most common way to acquire a company in Turkey. Leveraged acquisitions are typically financed through secured loans from onshore and offshore banks and financial institutions. Accordingly, we address:

  1. regulatory and tax matters with regard to bank loans, given other debt financing instruments – such as bond issuances, including high-yield bonds – are not commonly used for M&A financing in Turkey;
  2. securities and guarantees most commonly used in leveraged finance;
  3. priority of claims in case of bankruptcy of the borrower;
  4. jurisdiction chosen by the parties to resolve the disputes;
  5. acquisitions of public companies;
  6. noteworthy developments in M&A practice in Turkey; and
  7. the outlook for the M&A market in Turkey in the coming year.

Regulatory and tax matters

i Regulatory matters

Licensing requirement

Loans, which are the primary source of M&A financing, can be provided by banks licensed pursuant to the Turkish Banking Law (Law No. 5411) and related regulations, and are subject to strict operating requirements and supervision. Lending for profit without a licence constitutes a crime within the scope of the Turkish Criminal Code (Law No. 5237). However, foreign banks and financial institutions licensed in their home countries can provide loans to Turkish residents, subject to the provisions of Decree No. 32 regarding the Protection of the Value of Turkish Currency (Decree No. 32) and the Capital Movements Circular issued by the Central Bank of Turkey. Another exception of note here, 'intragroup lending' is possible under limited circumstances, as discussed further below.

ii Regulatory authorisations

Pursuant to the Turkish Act on the Protection of the Competition Law (Law No. 4054), a merger or acquisition resulting in a permanent change of control of the target company requires the authorisation of the Turkish Competition Board when: (1) total turnover of the parties, in Turkey, exceeds 100 million Turkish lira, and Turkish turnover of at least two of the parties each exceeds 30 million Turkish lira; or (2) at least one of the parties to the transaction has turnover in Turkey exceeding 30 million Turkish lira, and another party has a global turnover exceeding 500 million Turkish lira.

In some sectors, where licensing requirements exist, direct and indirect share transfers above certain thresholds require the approval of related authorities, for instance:

  1. the Energy Market Regulatory Authority of Turkey for companies in electricity and natural gas markets;
  2. the Capital Markets Board (CMB) of Turkey for intermediary institutions and portfolio management companies;
  3. the Banking Regulatory and Supervision Agency for banks, financial institutions (factoring, financial leasing, financing and saving financing companies); and
  4. the Central Bank of the Republic of Turkey for payment institutions and electronic money institutions.

iii Additional regulatory restrictions on bank loans

Requirements regarding denomination of loans in Turkish lira

Pursuant to Decree No. 32 and the Capital Movements Circular, Turkish residents are free to obtain Turkish lira-denominated loans from abroad. It is obligatory to access the loans provided through local intermediary banks. These loans are to be repaid in Turkish lira.

At the same time, local banks and financial institutions are free to extend Turkish lira loans to entities domiciled abroad. It is essential, however, that loans made to non-residents be Turkish lira denominated, although these loans can be repaid in either Turkish lira or a foreign currency (foreign currency).

Limitations on utilisation of foreign currency loans

Turkish residents are prohibited from utilising loans denominated in currencies other than Turkish lira (foreign currency loans) and foreign currency-indexed loans, whether originating onshore or offshore. Several exceptions, however, have been recognised in this regard. For example, Turkish residents who have foreign currency income, and whose total outstanding loan balance is less than US$15 million, may use foreign currency loans, provided the sum of the amount of the new loan and their current loan balance does not exceed the sum of their foreign currency income over the past three financial years.

Turkish residents with an outstanding foreign currency loan balance of US$15 million or more as of the loan utilisation date, regardless of foreign currency income, may use foreign currency loans.

When the borrower is a Turkish special purpose vehicle established solely for purchasing the shares of a company, the vehicle may be eligible to utilise foreign currency loans from abroad, up to the purchase price stated in the share purchase agreement.

Companies working in certain sectors, such as the defence and energy sectors, may use foreign currency loans.

It is obligatory to run loans obtained from abroad through local intermediary banks. It is thus essential that foreign currency loans obtained from abroad by Turkish residents are sent directly to the local bank that mediates the funding of the loan in Turkey.

On the other hand, banks and financial institutions are free to give foreign currency loans to entities domiciled abroad.

Also of note is that Turkish residents are to notify the Ministry of the Treasury and Finance of any guarantee they execute in favour of persons and entities domiciled abroad within 30 days.

iv Limitations on intragroup lending

In Turkey, there are many holding companies. Expanding their operations often involves acquisitions, which can be funded by members of these holding companies (i.e., intergroup lending).

Under the Turkish Commercial Code (Law No. 6102) (TCC), however, shareholders are prohibited from borrowing money from the company in which they own shares, unless they have fully paid off any debt arising from any equity undertaking; and the profit of the company from which the financing is sought, together with available reserves, is sufficient to meet any loss the company had in the previous year.

Also of note is that, pursuant to Corporate Tax Law (Law No. 5520), related-party transactions are subject to 'arms-length' principles that would apply to intragroup lending.

In addition, subject to the provision that certain additional documentation is to be provided to the intermediary bank, Turkish companies, fully owned by foreign companies, can obtain foreign currency-denominated loans from group companies residing abroad.

v Tax matters

With regard to acquisitions financed by loans, in the following we address several of the most important Turkish taxes that may come into play.

Direct taxes

In Turkey there are two primary forms of taxation: direct and indirect. Direct taxes consist of income tax (between 15 and 40 per cent in 2021) and corporate tax (25 per cent in 2021). Companies whose legal or business headquarters are located in Turkey are subject to corporate tax on their earnings, both inside and outside Turkey, while companies whose legal and business headquarters are abroad (limited liability taxpayers) are only taxed on income derived in Turkey. In this regard, Turkey has signed nearly 90 avoidance of double taxation treaties, which if applicable can result in enormous tax savings.

Withholding tax imposed on limited liability taxpayers' earnings are primarily regulated under Article 30 of the Corporate Tax Law. Pursuant to provisions of this law, generally speaking, earnings and revenue of limited liability taxpayers are subject to 15 per cent withholding tax, but in certain circumstances can be reduced to zero or increased to 30 per cent by the President, who is authorise to do so by the Corporate Tax Law.

Indirect taxes

Important indirect taxes include, among others, value-added tax (VAT), and the banking and insurance transactions, stamp and resource utilisation support fund taxes.

Considering bank loans are the focus of this chapter, especially those obtained from foreign banks, it is essential to understand, VAT, stamp tax and Resource Utilisation Support Fund, which we address below.

VAT and banking and insurance transactions tax

The main VAT rate, addressed in the Law on Value Added Tax (Law No. 3065), is 18 per cent. The sale of shares in a joint-stock company, however, are exempt from VAT. With regard to the sale of shares in a limited liability company, if the buyer holds the shares for at least two years, it is also exempt from VAT.

Turkish banks and insurance companies are exempt from VAT but are subject to a banking and insurance transaction tax, a 5 per cent tax on gains they receive from their transactions. For loans granted by others, such as a shareholder or group company, VAT is due on the interest payment.

The stamp tax

Stamp taxes are levied with regard to certain transactions taking place in Turkey, including but not limited to contracts, notes payable, letters of credit and letters of guarantee. Generally speaking, these taxes are the Turkish lira equivalent of 0.948 per cent of the highest amount set out in the document in question, subject to a cap of approximately 3.5 million Turkish lira.

Certain important exemptions exist, however, including but not limited to share purchase agreements, and loan agreements for loans given by banks, foreign credit institutions or international financial institutions.

Stamp tax is also to be paid with regard to documents not executed in Turkey when they are to be submitted to Turkish authorities, or their provisions result in a benefit to any of the parties in Turkey.

Resource utilisation and support fund

According to the Decree No. 88/12944 regarding the Resource Utilisation Support Fund and its related Communiqués, foreign currency loans obtained from abroad by Turkish residents, other than by banks and financial institutions, are subject to the Resource Utilisation Support Fund. Without addressing all the details of this complicated tax, its rates generally vary between zero to 3 per cent, depending on the average maturity of the financing in question.

Security and guarantees

Aside from acquisition financing, in Turkey bank loans are mostly secured by securities established over the assets of the borrower or its group companies or its shareholders including but not limited to mortgages, share pledges, assignment of receivables and bank account pledges.

However, for acquisition finance transactions, the TCC explicitly prohibits the buyer (and the seller) from securing the financing with assets of the target company detailed below.

i Limits on the automatic transfer, in the event of default, to security holders

According to the Turkish Civil Code (Law No. 4721), a contract provision providing that the ownership of pledged immovable or movable property is to pass to the security holder, in case of an event of default, is null and void. Briefly, a security holder is limited to the proceeds of the sale, usually through judicial foreclosure, of such property.

In addition, even in the event of the debtor's bankruptcy, the priority of the security holder is reserved. In such a case, the secured creditor may look to the proceeds of the sale of the security in the bankruptcy and, if not made whole, to whatever funds may be left after the payment of higher-priority creditors such as public receivables.

Another regulation in the legislation that authorises the creditor to convert the pledged subject into money is Article 47 of the Turkish Capital Markets Law (No. 6362). The aforementioned regulation not only explicitly stipulates that the creditor can convert the pledged subject into money if the debt is due, but also stipulates that the parties may even enter into a contract for the transfer of the subject property to the creditor in the guarantee contracts regarding the capital market instruments dematerialised by the Central Securities Depository of Turkey (CSD), contrary to the lex commissoria prohibition.

ii Turkey's 'financial assistance prohibition'

Pursuant to Article 380 of the TCC, within the scope of financing provided to a purchaser, so as to acquire the shares of a company whose shares are targeted for acquisition the use of the assets of the target company as security; or the use of financing provided by the target company to the purchaser, is prohibited. Article 380 also provides that transactions, the provision of loans, guarantees and advances by the target company or third parties, for the purpose of acquiring the company's own shares, are null and void.

There are two exceptions to this prohibition. It does not apply to those transactions that fall within the scope of the ordinary business of credit and financial institutions; and grant advance funds, loan or security to the employees of the company or to the employees of the company's affiliates, for the purpose of acquiring the company's shares.

Even when these exceptions apply, the transaction should not reduce the reserves required to be set aside by the applicable law and the articles of association, and should not violate any existing limits and restrictions on these reserves.

One of the objective of the financial assistance prohibition is to prevent acquisitions that might cause losses to shareholders and creditors and assets of the target company. For instance, one of these transactions is leverage buy-out transactions, in which a significant amount of the transaction price is financed by third-party loans and said loans are mostly secured by the target company's assets.

iii Real estate mortgages

Any present, future or contingent debt can be secured with a mortgage on real property. The scope of the mortgage also includes the integral and accessory parts of the real estate. A mortgage may secure the principal amount of the debt, follow-up expenses, contractual interest, delay (default) interest, compulsory expenses for the protection of the real estate and paid insurance premiums.

There are two types of mortgages. The first one is the limit mortgage. When the amount of the debt is uncertain, the amount of collateral for the immovables can be limited to the limit set forth in the mortgage deed. If the mortgage is a limit mortgage, the debtor is only liable for the amount specified in the mortgage deed. In other words, the mortgagee can ask to recover all its claims, including the interest and other secondary claims of the mortgagee secured by the mortgage up to the upper limit.

On the other hand, if the amount of the debt to be secured with a mortgage is certain, a principal amount mortgage is established. In the principal amount mortgage, the mortgagee can claim all secondary claims without any limit.

In order to establish a mortgage, the owner of the real property and the debtor must draw up a written mortgage contract in the presence of the Title Deed Registry.

In principle, the mortgage amount is to be registered in Turkish lira. However, in order to secure the loans given in foreign currency by credit institutions operating in Turkey or abroad, mortgages can be registered in foreign currency. In this case, the amount expressed by each degree is shown over the currency type in which the pledged receivable is determined. However, a pledge cannot be established using more than one type of currency of the same degree.

In Turkish law, the fixed degree system is accepted for mortgages with exceptions, whereas the advancement system has not been accepted. Priority is determined by the degree of mortgage on which the mortgage is registered. In this context, a first degree mortgage has priority even if it is established at a later date than the second degree mortgage. In the event of a foreclosure sale of the mortgaged property, mortgagees are satisfied in order of degree. First of all, when the mortgaged property is liquidated, the first-degree mortgagee receives its receivables up to the mortgage amount from the proceeds of the mortgaged property. In case of remaining proceeds, the second-degree and then the third-degree (and then fourth, fifth, etc.) mortgage creditors are satisfied. In the fixed degree system the mortgage does not move up to the removed degree and the available degree remains vacant. When one of the creditors in the upper degree is satisfied, the next creditor cannot automatically advance to the vacant degree unless there is such provision between the mortagagee and mortgagor.

More than one mortgage can be established on a certain degree. Unless otherwise specified in the mortgage agreement, the rights of each mortgagee under the same degree ranks pari passu3 with the rights of the other joint mortgages, meaning that creditors of the same degree will be paid in proportion to their receivables after redemption.

iv Pledge over share

Unless there are additional conditions in the articles of association of the company to which the shares belong, a pledge of shares of a Turkish joint-stock company can be established by signing a written pledge agreement, endorsing the share certificate delivering the share certificates. In addition, the delivery of the share certificates to the pledgee must be recorded in the company share ledger upon the resolution of the board of directors in order to ensure publicity and to ensure that the third parties are informed of the existence of the pledge right.

The shares of publicly traded companies are in dematerialised form. The pledge agreements regarding capital market instruments, monitored by CSD should be in written form. Notifying CSD of the pledge established on the dematerialised capital market instruments is necessary to assert the right of the pledge against third parties. In addition, the pledged shares are transferred to the sub-account of the pledgee held with the CSD with a record of the pledge.

Unless otherwise stated in the share pledge agreement, rights such as the use of partnership rights and the receipt of dividends will belong to the pledgor.

Considering the pledge over the shares of a limited liability company, a written pledge agreement should be executed before a notary public and the agreement should be registered on the share ledger of the company upon a resolution of the general assembly of the company.

v Pledge over movables and movables pledge in commercial transaction

In order to establish a pledge on movable property, a written pledge agreement must be drawn up between the pledgor and the pledgee, and the physical possession of the relevant movable property must be transferred to the pledgee.

If the movable subject to the pledge is required to be registered on an official registry such as the vehicle registry in order for the pledge to be valid, the pledge is required to be registered to such official registry. In this case, there is no need for the actual transfer of phsyical possession.

If there is more than one right of pledge on the same movable, the creditors are paid according to the order of the pledge rights. The order of the right of pledge is determined by the date of its establishment.

Pursuant to the provisions of the Movable Pledge Law in Commercial Transactions (Law No. 6750), a pledge can be established on movables without any requirement to transfer the physical possession of the pledged movables to the pledgee. While the pledgee may be credit institutions, merchants, tradesmen, farmers, producers' organisations, or natural and legal persons who are self-employed, the pledgor may be merchants or tradesmen. The pledge agreement must be drawn up in writing, the signatures of the parties must be notarised or the contract must be signed in the presence of the registrar and then registered with the Pledged Movables Registry.

vi Assignment of receivables and bank account pledge

With the assignment of the receivable, the receivable is transferred to the transferee, together with rights other than those specific to the personality of the transferor, with a written contract between the transferor and the transferee, without the need for the consent of the debtor. Existing receivables can be transferred or pledged and contingent or term receivables (such as insurance receivables) can be pledged. However, the receivable must be determinable at the latest at the time of redemption.

Regarding a bank account pledge, the creditor generally puts a pledge on the bank accounts of the debtor to secure its receivables. The deposit in the debtor's bank account is a kind of receivable of the debtor from the bank where the account is held. In order for an account pledge to be established, a written pledge agreement must be drawn up between the account holder and the pledgee.

vii Restrictions on corporate benefit

Pursuant to Article 202 of the TCC, a parent company cannot force the subsidiary to carry out transactions that will cause the subsidiary to incur losses, for example, reducing the assets of the subsidiary company, making payments or providing guarantees for the parent company's debts. However, if this loss is actually compensated for in that operating year, or if a claim of equivalent value is granted to the subsidiary by the end of that operating year, this prohibition will be exempted.

If the losses that have occurred are not compensated for within the operating year, or if an equal claim is not granted within the period, each shareholder of the subsidiary company may request compensation from the parent company and its board members responsible for the losses. Creditors can also demand that the company's losses be paid to the company, even if the company has not gone bankrupt.

Regarding general assembly resolutions related to transactions such as mergers, spin-offs or an important amendment to the articles of association, which are the result of the exercise of the dominance of the parent company and have no reasonable economic justification, shareholders of the affected subsidiary who vote against the general assembly resolution may request from the court:

  1. compensation for their losses;
  2. the purchase of their shares at the price listed on a recognised stock exchange; or
  3. the purchase of their shares at a price determined through the use of a generally accepted valuation method, when there is no such stock exchange price, or the stock market price does not comply with the shares' fair value.

On the other hand, pursuant to Article 203 of the TCC, if a parent company wholly owns a subsidiary, the board of directors of the parent company may give instructions (in line with the determined and factual group policies) which can cause financial loss to the subsidiary. The board of directors of the subsidiary must comply with the instructions of the parent company. However, the parent company cannot give instructions that would exceed the subsidiary's solvency, compromise its existence and cause the loss of its important assets. If the loss incurred in the subsidiary company because of the instructions given by the parent company and its executives is not compensated for within that accounting year, or if the company is not granted an equivalent right of claim by specifying the date and the method of compensation, the creditors who have suffered the loss have the right to claim for compensation against the parent company and its board of directors responsible for the loss.

viii Clawback provisions and voidable transactions

Pursuant to the Turkish Enforcement and Bankruptcy Law (Law No. 2004) (EBL), transactions entered into by the bankrupt debtor within a certain period of time prior to bankruptcy can be invalidated by the court, to which is applied by the creditors of the debtor. Such transactions to be invalidated include donations and similar actions, disposals made in bad faith and transactions providing advantage to some creditors by the debtor.

Priority of claims

i Ranking system in EBL

In the event of bankruptcy, the rank of the creditors or debtee with respect to the distribution of a debtor's liquidated assets is regulated in Article 206 of the EBL. Briefly, the order of priority is as follows:

  1. public receivables, such as tax receivables and expenses incurred for selling pledged assets;
  2. secured debts; and
  3. unsecured debts (broken into four separate sub-categories, not detailed here).

Payments cannot be made to the creditors in the lower category until all creditors in the upper category are satisfied. However, claims of the creditors in the same category (except secured debts category) rank pari passu.

ii Subordination

The concept of subordination of debt is not recognised in the EBL. While the first three sub-categories mentioned in point (c) above are privileged, the fourth sub-category does not have any priority. Subordinated loans and the receivables of creditors which are not secured or pledged are in the fourth category, meaning that these receivables rank pari passu. In order to overcome this situation, the creditors demand that the subordinated loans be assigned to them. Although subordianted loans are not separately recognised in the EBL, the creditor will be able to claim the subordinated receivables by contractual relationship.


Except in cases where the jurisdiction is determined according to exclusive jurisdiction of a particular Turkish court, the parties may agree on the jurisdiction in which any disputes that may arise are to be resolved, which can include a foreign state court, provided there is, for example, a foreign element. Such an agreement is invalid, unless it is in writing. That said, parties cannot choose the jurisdiction of a court of foreign state for disputes related to certain types of contracts, such as consumer contracts, employment contracts and insurance contracts.

Turkish courts will enforce a judgment of foreign courts when:

  1. enforcement of court decrees rendered by foreign courts is to be final and non-appealable;
  2. the judgment is given on matters not falling within the exclusive jurisdiction of the Turkish courts;
  3. the court decree shall not openly be contrary to public order; or
  4. the person against whom enforcement is requested was not duly called pursuant to the laws of that foreign state or to the court that has given the judgment, or was not represented before that court, or the court decree was not pronounced in his or her absence or by a default judgment in a manner contrary to these laws, and the person has not objected to the exequatur based on the foregoing grounds before the Turkish court.

With regard to arbitration, although it is mostly preferred in large-scale commercial contracts where one party is foreign or has a foreign creditor in Turkey, there is a growing trend of the commercial arbitration with respect to lower-scale contracts. ISTAC (Istanbul Arbitration Centre) is an independent, neutral and impartial institution providing dispute resolution services for both international and domestic parties.

Foreign arbitral awards are, generally speaking, subject to enforcement by Turkish courts, except, for example, where disputes are non-arbitrable under Turkish law or enforcement would violate Turkish public policy. Non-arbitrable disputes include, for example:

  1. disputes arising from or relating to immovable properties located in Turkey; or
  2. disputes relating to bankruptcy, criminal, administrative or family law.

Acquisitions of public companies

Generally speaking, the provisions regulating mergers and acquisitions of commercial companies are found in the TCC, and apply to both private and public entities. Publicly held companies operate under the supervision and control of the CMB, and are obliged to comply with the rules and requirements of the TCC, the Capital Market Law and related regulations issued and published by the CMB and Borsa Istanbul, Turkey's sole stock exchange.

i Disclosure requirements

Pursuant to the Capital Market Law and related regulations, certain 'material' information that may affect the value and price of capital market instruments must be disclosed to the public by issuers or related parties. Mergers and acquisitions involving publicly traded companies are, by definition, subject to these disclosure requirements. In this regard, for example, a formal announcement of any such activity must be approved by the CMB. Approval of any such announcement is not to be interpreted as a warranty by the CMB with regard to the accuracy of the information contained in the announcement or in other related documentation.

The shareholders, holding shares as of the date of public disclosure of 'material' transactions, who attend the general assembly meeting regarding important transactions and who vote against the general assembly resolution, have the right to exit by selling their shares to the publicly held corporation. The exit must be exercised through an intermediary institution.

ii Mandatory tender offers

Pursuant to the CMB's Communiqué on Tender Offers (II-26.1), in the event a person, or persons acting in concert with that person, acquire control by fully or partially acquiring the shares of the target corporation, a mandatory tender offer must be made in such manner so as to protect the rights of all shareholders who hold shares of the target corporation. In a mandatory tender offer, all shares included in the same group of the target corporation are subject to equal treatment.

Within six business days following the acquisition of the shares giving control, it is obligatory to file an application to the CMB for a mandatory tender offer. Following the approval of the CMB, it is compulsory to start the actual takeover bid process and complete the process in line with the duration defined in the Communiqué.

Pursuant to the provisions of the Communiqué, if the mandatory tender offer requirement is not fulfilled within the granted periods, voting rights of the relevant shareholders who are obliged to make a mandatory tender offer will be automatically frozen as of the date of occurrence of the said breach, without any further act or action of the CMB. Said shares will not be taken into consideration in determination of general assembly meeting quorum. Regardless of the reasons of freezing, and unless otherwise decided by the CMB, frozen voting rights will be automatically released without any further act or action of the CMB in the first day following completion of the mandatory takeover bid process. On the other hand, there are some exemptions to the mandatory tender offers. For exemption requests, an application must be filed with the CMB by those who are obliged to make an offer within six business days following the date the obligation to make a takeover bid arises.

Some of the important matters related to a mandatory tender offer are to be publicly disclosed, such as:

  1. decision to make a takeover bid;
  2. information about the takeover bid price or how this price determined;
  3. an actual application to the CMB for making a takeover bid;
  4. summary or conclusion parts of assessment reports to be prepared for determination of takeover bid price;
  5. total number and amount of shares purchased, and total number of shareholders that have responded to the takeover bid, as of the end of the takeover bid period;
  6. detailed shareholding structure and management of the corporation the shares of which are subject to the takeover bid, as of the end of the takeover bid period; and
  7. actions taken to ensure price equality.

iii Squeeze-out

Pursuant to Article 208 of the TCC, a parent company directly or indirectly owning at least 90 per cent of the shares and voting rights of a company can purchase the shares of the minority, if the minority prevents the company from working effectively, acts against the rule of good faith, causes noticeable distress or acts recklessly.

Pursuant to Article 141 of the TCC, in a merger contract, companies participating in the merger can provide shareholders with the option to choose either to have shares and partnership rights in the transferee or to receive a cash consideration for withdrawal equal to the actual value of the company shares to be acquired. If the merger contract sets forth a cash consideration for withdrawals, approval by 90 per cent of shareholders with voting rights in the transferring company is required.

That said, pursuant to Capital Market Law Article 27, Article 208 of the TCC does not apply to publicly held corporations with regard to squeeze-out and sell-out rights. Pursuant to Communiqué on Squeeze-Out and Sell-Out Rights (II-27.3), as a result of a takeover bid or by any other means including acting in concert, in cases where the controlling shareholder's voting rights reach 98 per cent or the controlling shareholder purchases an additional share while holding 98 per cent of the shares, regardless of whether the shares are privileged or not, controlling shareholders are entitled to squeeze out all other shareholders, and other shareholders are entitled to sell out their shares to the controlling shareholder. On the other hand, the rights of squeeze-out or sell-out may not be used for a period of two years following the starting date of trading of the corporation's shares in Borsa Istanbul. In addition, if case management control is obtained at the same time as the right to squeeze-out or sell-out, it is assumed that the mandatory takeover bid obligation does not arise. Pursuant to the Communiqué, the corporation is required to disclose the information regarding the squeeze-out and sell-out process to the public such as:

  1. a summary of the valuation report which calculates the squeeze out and sell out price;
  2. the information that the sell-out rights have been triggered; and
  3. the number of shareholders exercising this right and the share in the capital ratios and the share ratio of the controlling partner in the capital.

The year in review

As noted in The Acquisition and Leveraged Finance Review edition 7, M&A activity in Turkey fell sharply in 2019 in line with the global slowdown in economic activity as a result of macroeconomic uncertainties, trade tensions, geopolitical challenges and slower growth prospects. Turkey's M&A activity was similarly damaged in the first half of 2020 for the reasons mentioned above, coupled with the devastating impact of the covid-19 crisis. At the same time, local M&A activity has shown a remarkable recovery since June 2020, when the national quarantine was lifted, and has exceeded expectations.

According to the market data,4 although most M&A activity in 2020 was concentrated in small and medium-sized, early-stage investments, two large deals accounted for 40 per cent of last year's total US$9 billion deal value. In one of these, US-based game developer Zynga acquired the Turkish mobile game company Peak Games for US$1.8 billion. In the other, the controlling stake in the Turkish GSM operator Turkcell was acquired by the Sovereign Wealth Fund of Turkey for US$1.8 billion.

It is estimated that nearly half of the 2020 M&A deal value, US$4.6 billion, was made by foreign investors, representing a 35 per cent increase in the deal value of foreign investors from 2019.

With regard to foreign investors, European investors led the market with 47 transactions, with a total value exceeding US$1.2 billion. European investors were followed by North American, with 13 deals valued at US$2.1 billion.

Deal numbers, by company type, included internet and mobile services (97), technology (52), manufacturing (26), financial services (24), energy (17), healthcare (12), logistics and transportation (11), and e-commerce (9).


There is potential for significant growth in M&A activity Turkey over the coming years. The start-up 'ecosystem' in Turkey has been growing, especially in the fields of IT and technology. The media, telecommunication, pharmaceutical and healthcare, and manufacturing sectors seem likely to attract investors in 2022 and the years that follow. Moreover, the low value of the Turkish lira, and what many believe to be the undervaluing of Turkish assets, may also create opportunities for foreign investors.

At the same time, the continuation of the covid crisis and political uncertainties, including the approaching 2023 national elections, are important variables that might adversely affect the M&A market. In addition, political uncertainty and security problems in the Middle East and surrounding region, and the often-strained relationships between Turkey and other powerful countries, such as the United States, Russia and European Union countries, will all play a role in determining the investment climate in Turkey for both domestic and foreign investors.


1 Okan Beygo is a founding partner, Oya Gökalp is an associate and Serdar Sahin is a legal intern at Aksu Çaliskan Beygo Attorney Partnership (ASC Law).

3 Pari passu is the Latin phrase for 'ranking equally', or 'with an equal step' or 'on equal footing'.

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