Technology M&A 2025 in Turkey

In the past year, the Turkish technology M&A landscape has mirrored global trends, experiencing fluctuations. While overall M&A activity in Turkey slowed down throughout 2022 and into early 2023 due to economic instability, inflation, and geopolitical tensions, there were signs of recovery towards the end of 2024. The technology sector remains a focal point in Turkey’s M&A activities. Pursuant to KPMG’s Turkish Startup Investments Review Q2 2024, the start-up ecosystem experienced a remarkable increase in investment, with deal volume reaching USD558.78 million, compared to USD149.9 million in Q2 2023 and USD43.1 million in Q1 2024.

Overall, the Turkish market is witnessing an increase in cross-border M&A transactions, driven by a growing technology ecosystem and government support for tech initiatives. Post-2020, Turkey has generated seven unicorns (ie, achieving a valuation in excess of USD1 billion), with Getir and Trendyol reaching decacorn status (ie, achieving a valuation in excess of USD10 billion).

1.2 Key Trends

Similar to global trends, fintech, gaming, SaaS and AI are the leading sectors in the Turkish technology M&A landscape, with an increasing trend in cross-border M&As. Foreign companies have been seeking to capitalise on the local market’s potential in recent years. Turkey has been attracting growing interest not only for its wide range of investment opportunities and dynamic sectors, but also for the diversity of its exit strategies. This trend is supported by a growing start-up culture and government initiatives aimed at attracting investment.

2024 witnessed significant regulatory changes to strengthen the country’s start-up ecosystem, resolve certain market shortcomings and align with global standards. For instance, the Communiqué Amending the Venture Capital Investment Funds Communiqué (III-52.4) announced by the Capital Markets Board (CMB) now permits flexible fund structures such as umbrella funds, and recognises investments made through contracts granting future equity rights in companies as valid Venture Capital Investment Funds (VCIF) investments. A new regulatory framework was also put in place for crypto platforms, which clarifies the conditions for the establishment of platforms, the criteria to be met by the founders, shareholders and managers of platforms, and the incorporation procedures. Following the issuance of this new legislation, another principle decision was published in the CMB’s bulletin in September 2024, introducing certain rules and principles to protect investors and prevent risks that may arise in the sector during the transition period.

2. Establishing a New Company, Early-Stage Financing and Venture Capital Financing of a New Technology Company

2.1 Establishing a New Company

New start-up companies are typically incorporated locally due to many reasons, among others, market accessibility, available local incentives and the fact that there are no significant regulatory disadvantages to being locally incorporated. Companies need to be registered with the local trade registry to be incorporated. This can be completed within about a week upon a complete filing. The minimum share capital requirement for a private joint stock company (JSC) is TRY250,000 (TRY500,000 for JSCs adopting the registered capital system), and TRY50,000 for limited liability companies (LLC).

However, depending on specific business goals, expanding strategy, funding needs and certain tax advantages, start-up companies may also opt for incorporation in a different jurisdiction, or a flip-up in another jurisdiction after being locally incorporated.

2.2 Type of Entity

The most common type of entity for the initial incorporation by entrepreneurs in Turkey is the JSC, given that the legal framework for corporate governance of JSCs is better developed and more flexible than that of LLCs, and that certain tax and other disadvantages may arise upon the sale of shares in LLCs. LLCs are usually preferred for fully owned subsidiaries with minimum capital and governance requirements, and are commonly used for small-scale operations. JSCs, on the other hand, are generally preferred by investors looking to form a joint venture and/or planning for a possible exit. If a start-up is initially incorporated in the form of an LLC (eg, due to lower initial share capital requirements), later conversion to JSC may be considered for a tax-efficient exit or IPO process. Conversion from LLC to JSC is tax neutral and a common conversion in Turkey.

2.3 Early-Stage Financing

Early-stage financing (seed investment) for a start-up in Turkey typically comes from a combination of local and foreign investors, friends and family, angel investors and VCs. Private equity (PE) and strategic investors usually participate at later stages of the investment, as they prefer established businesses with lower risk and a proven track record. However, PEs or strategic investors may be observed in relatively earlier stages, depending on their strategic goals and risk appetite. Financing is documented through the appropriate transaction documents, typically through investment, subscription, share purchase and shareholders’ agreements (sometimes in combined forms).

2.4 Venture Capital

Home country venture capital (VC) in Turkey is still in the early stages of development and is gradually growing as the Turkish start-up ecosystem expands. Although there is increasing interest and investment from local VC firms, the overall VC market in Turkey is not as mature as in more established markets. Consequently, foreign VC firms are actively providing financing in the Turkish market.

2.5 Venture Capital Documentation

As VC is still in the early phases of growth, model documents and developed standards, such as the ones established by the British Venture Capital Association in the UK or National Venture Capital Association in the USA, are not available. Despite the lack of model documents, similar concepts are negotiated in Turkey, much like in global markets.

2.6 Change of Corporate Form or Migration

Turkish start-ups typically stay in the same corporate form as they advance in their development. One of the main reasons for this is that the initial entity is usually the owner of goodwill, and the transfer of goodwill is, in principle, taxable. If the start-up was incorporated as an LLC, however, it would usually be later converted to a JSC before it seeks to attract new investors (the conversion being tax-neutral).On the other hand, an increasing number of Turkish start-ups are undertaking “flip-up” transactions in jurisdictions such as the USA or the UK. This restructuring strategy may be appealing for start-up companies seeking suitable tax regimes favouring their businesses, broader access to capital markets, and legal frameworks that are more accommodating to international investors.

3. Initial Public Offering (IPO) as a Liquidity Event

3.1 IPO v Sale

The sale process (M&A) to a potential buyer is the first choice due to complexities and increased IPO thresholds being a barrier for a start-up to go public through a listing on Borsa Istanbul. The dual-track process offers additional complexity given the difficulty in maintaining confidentiality and the risk of the IPO being pulled off due to the leakage of material information. Therefore, the Turkish market witnesses only a limited number of dual-track processes.

3.2 Choice of Listing

Borsa Istanbul is the preferred venue for listing due to its large retail investor base and suitability to provide liquidity in the secondary market.

Therefore, a foreign exchange listing is not needed, and is not usually preferred due to the burdensome disclosure requirements in a foreign exchange compared to a Turkish listing, the associated costs, and the difficulty of raising capital in a foreign exchange. The dual listing of shares of Turkish issuers is permitted on Borsa Istanbul if such shares are already listed on an exchange in certain foreign jurisdictions. However, this is not common at all, because the dual-listing will require ongoing requirements in the relevant foreign jurisdiction.

3.3 Impact of the Choice of Listing on Future M&A Transactions

There are almost no foreign listings of Turkish start-ups in the market. Even if such listing occurs, a start-up that is neither a public company nor listed in Turkey would not be subject to certain regulations that apply to Turkish public/listed companies, such as squeeze-out or tender offer.

4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital-Financed Company)

4.1 Liquidity Event: Sale Process

Both auction and bilateral negotiation with a chosen buyer are common in the Turkish market and the ultimate choice will be made depending on the specific circumstances at the time of the transaction, such as the target company’s size and the nature of the market. Still, it is more common for the sale to be run as a bilateral negotiation with a chosen buyer for small and medium-sized target companies, whereas an auction process may be run for higher-profile deals.

4.2 Liquidity Event: Transaction Structure

Exits may be structured both as a 100% sale or the sale of a controlling interest, depending on various factors such as the market conditions, valuation, as well as the VCs’ position in the company. For instance, a VC would typically opt for a full exit if it has held the investment in the company for a significant time and faces pressure to return the investment to its stakeholders.

4.3 Liquidity Event: Form of Consideration

Although most transactions in Turkey are carried out as a sale of the company for cash, there has been a rising trend in recent years of market players entering into stock-for-stock transactions in flip-ups, or in a combination of cash and stock transactions, where both parties see the swap as a growth opportunity.

4.4 Liquidity Event: Certain Transaction Terms

Unlike the founders of a start-up, who are expected to give business and tax representations and warranties due to their involvement in running the business, VC investors are typically not expected to give representations and warranties other than fundamental warranties (ie, generally limited to title and capacity), or held liable after closing through indemnification mechanisms. Depending on the negotiation leverage of the parties, it may be possible to agree on an escrow, or a holdback mechanism (the latter being less common). However, the starting point for a VC is usually to avoid both escrow and holdback mechanisms as VCs typically prefer to exit with minimal post-completion complications, and to receive their maximised full investment without delay to be able to return the investments in a timely manner to their stakeholders.

Although the use of warranty and indemnity (W&I) insurance has increased over the years in high-profile cross-border M&As in Turkey, it has not become a Turkish market standard yet and is not as commonly used as in more mature markets like the UK or the USA. This is mainly due to availability issues, the costs associated with the W&I insurance (factoring in the country risk for Turkey as an emerging market) and the insurance providers requesting broad exclusions, which limits the benefit of having W&I insurance in the first place.

5. Spin-Offs

5.1 Trends: Spin-Offs

Spin-offs, in general, are not considered customary in the technology sector, yet they may be efficient at times, especially if a business line or subsidiary is being carved out. In such a case, a tax-free (partial) spin-off is preferred as per established practices.

5.2 Tax Consequences

Spin-offs in Turkey can be structured as tax-free transactions at both the corporate and the shareholders’ level, provided that specific requirements under Turkish Corporate Income Tax Law are met. The most critical requirement is that all assets and liabilities associated with the carve-out entity (or business enterprise, as the case may be) must be transferred on an as-is basis (ie, there must be no step up in valuation).

5.3 Spin-Off Followed by a Business Combination

A spin-off followed by a business combination is possible in Turkey. There are no specific requirements and generally there are no restrictions for a spin-off followed by a business combination. After the spin-off, a business combination can effectively occur through a merger or acquisition unless it is cross-border.

5.4 Timing and Tax Authority Ruling

In Turkey, the process and timing for completing a spin-off involve several fiscal and corporate steps. The timing can vary depending on how the spin-off is structured, the parties involved, and the form of the carve-out entity (or business enterprise, as the case may be). A spin-off generally takes around three months, and partial spin-offs leading to capital reduction (where the target entity/business is carved out of the original company) may require additional steps.

6. Acquisitions of Public (Exchange-Listed) Technology Companies

6.1 Stakebuilding

Both acquisitions by the existing shareholders in a public company as well as new shareholders making an offer for a public company are common in Turkey.

If a bidder decides to build a stake in a public target, this must be disclosed to the public when the change in share ownership or management control reaches the thresholds below:

• A person or persons acting together, becoming direct or indirect holders of 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95% of the issued share capital or voting rights of a public company in Turkey, must disclose the acquisitions, and disclose any transaction in the shares or voting rights of the company, when the total number of the shares or voting rights they hold falls below (or exceeds) these thresholds.
• The founding shareholders and the shareholders must disclose any direct or indirect acquisition of 5%, 10%, 15%, 20%, 25%, 33%, 50%, 67% or 95% of the issued share capital or voting rights of the company through investment funds belonging to a founding shareholder as well as any transaction in the shares or voting rights of the company, when the total number of the shares or voting rights that it holds falls below these thresholds.

Public companies must make the necessary updates within two business days of any changes relating to the general information that the company disclosed on the Public Disclosure Platform (PDP). The Central Registry Agency is responsible for updating the shareholder list, setting out the natural person and legal entity shareholders who hold directly 5% or more of the shares or voting rights in a public company.

Disclosure regarding the above changes in ownership of shares or management control in a public company must be made no later than 9 am Istanbul time on the third business day following the event triggering the disclosure requirement.

The buyer does not need to state the purpose of the acquisition of the stake and its plans or intentions with respect to the company, nor is it required to make a proposal or state that it will not be making a proposal within a specified period of time (no “put up or shut up” requirement).

6.2 Mandatory Offer

Turkish law requires that a general offer be made by a person (or group of persons acting in concert) who obtains, directly or indirectly, management control of a public company by acquiring shares or voting rights using any means, or through a shareholders’ agreement, even though share ownership remains the same.

“Management control” is defined to mean holding shares carrying more than 50% of the voting rights of the target company. Alternatively, regardless of the 50% threshold, if the buyer (or persons acting in concert) acquires the right/power to appoint or nominate the majority of the board members of the target by acquiring privileged shares, control will be deemed to be obtained, and consequently an offer must be made to the other shareholders.

An offer is not triggered where the actual situation, or de facto circumstances or events at the shareholders’ meeting or the capital structure of the company enables the appointment of majority directors, or board members, by a person or group, since this is not considered, under the relevant tender offer rules, to be an acquisition of management control.

6.3 Transaction Structures

Most Turkish public companies are controlled by a single shareholder, or a small group of shareholders (ie, family members). Therefore, control is obtained through acquisition of shares from the majority shareholder. Although the legislation enables obtaining control through mergers or voluntary tender offers, these are rare in the Turkish market. There is no rule forbidding hostile bids under Turkish law, and these may be conducted on the same legal basis as voluntary tender offers. However, hostile takeovers are not common in Turkey either, and public companies cannot be approached on a hostile basis due to their shareholding structure, which typically consists of a low percentage of free-floating (publicly traded) shares, while the shares that are not publicly traded are held by a single shareholder or a small group of shareholders with an absolute majority. As a result, management control usually rests with the majority/controlling shareholder and the chances of a hostile bidder acquiring control of a publicly traded company are very low.

6.4 Consideration and Minimum Price

Typically, public company acquisitions in Turkey, including in the technology industry, are structured with cash consideration. Securities can be offered instead of cash with consent from the shareholders, which is rare in Turkish takeovers. The same goes for tender offers where cash consideration will be the preferred structuring; however, securities (including stocks) traded on a market can also be offered for consideration. Having said that, merger transactions under Turkish law are required to be structured as stock-for-stock transactions. The Turkish Commercial Code allows for an equalisation payment to be made to determine the shareholding ratios of the shareholders, provided that it does not exceed one tenth of the actual value of the shares.

There is no minimum price requirement for a takeover offer in M&A transactions. Similar to other jurisdictions, it is typical to use contingent value rights or other mechanisms to bridge value gaps between the parties in Turkish transactions with high valuation uncertainty, such as performance-based earn-outs or deferred payment mechanisms. Please see 6.7 Minimum Acceptance Conditions for price conditions in mandatory and voluntary tender offers.

6.5 Common Conditions for a Takeover Offer/Tender Offer

If a takeover offer for a listed company is being launched, an application for the takeover offer should be filed with the CMB for the approval of the takeover offer (ie, the voluntary tender offer), which must comply with certain rules and procedures under the CMB regulations.

6.6 Deal Documentation

Although legally possible, it is not customary in Turkey to enter into a transaction agreement in connection with a takeover offer. The financial burden of a mandatory tender offer is on the buyer in line with Turkish law. However, depending on their deal appetite, the parties may negotiate to share the financial costs of a mandatory tender offer.

It is not customary for a public company to give representations and warranties.

6.7 Minimum Acceptance Conditions

In the case of a mandatory tender offer, in principle, the offeror is required to offer cash consideration in Turkish Lira; and publicly traded securities can be offered instead of cash upon the written consent of the shareholders. If the target is a listed entity, the offer price must not be less than:

• the adjusted arithmetic average of the daily weighted average market price of the shares within the six-month period preceding the public disclosure of the share purchase agreement, shareholder agreement or other occurrences leading to the acquisition of management control over the company; and
• the highest price paid for the same class of shares by the offeror within the six-month period prior to the date of acquisition of the shares, including the price paid to the seller in the share purchase transaction as a result of which the obligation to make a tender offer is triggered.

In the case of an indirect change of control at the target company triggering the tender offer, the offer price must not be less than the greater of one of the following:

• the highest price paid for the same class of shares by the offeror within the six-month period prior to the date of acquisition of the shares as a result of which the obligation to make a tender offer is triggered; or
• the adjusted arithmetic average of the daily weighted average market price of the shares of the target company within the six-month period prior to the date when an announcement is made of the share purchase agreement, shareholder agreement or other occurrences leading to the acquisition of management control over the target company.

Price adjustments, earn-outs, additional payment options/schemes, and other similar elements that increase the original purchase price paid to the seller will be taken into account in determining the offer price. If the offer price cannot be determined based on the foregoing, the CMB may request a valuation report on the target in order for the offer price to be determined.

If the share purchase price in the original transaction triggering the mandatory offer is denominated in a foreign currency, the offer price in Turkish Lira will be calculated based on the foreign exchange buying rate (as announced by the Central Bank), being the higher of the buying rate (i) as of the date of acquisition of the shares triggering the offer and (ii) as of the business day preceding the commencement of the offer period.

If, after the announcement of the offer price and before the offer closes, the offeror or persons acting in concert, purchase shares in the target company at a price higher than the offer price, the offeror is obliged to increase its offer such that it is not less than the highest price paid for the shares so acquired.

Voluntary tender offers may be freely launched, without any price restriction, by the shareholders or third parties for all or part of the shares of a public company.

6.8 Squeeze-Out Mechanisms

Either as a result of a tender offer or through other means, if a shareholder’s shares reach at least 98% of the total voting rights, or the controlling shareholder acquires additional shares while it already holds at least 98% of the voting rights, a sell-out process is triggered, in which the minority shareholders will be entitled to sell their shares to the controlling shareholder. If there are any shares that are not sold by the minority shareholders in the sell-out period, the controlling shareholder will have the right to squeeze out all of the remaining shareholders and delist the company.

6.9 Requirement to Have Certain Funds/Financing to Launch a Takeover Offer

Only the offeror can launch the offer and certain funds need to be made available by the offeror for a successful bid in both mandatory and voluntary tender offers.

Mandatory tender offers cannot be conditional upon the bidder obtaining financing. In voluntary offers, however, bidders are free to set the offering conditions.

6.10 Types of Deal Protection Measures

It is not customary in Turkish public M&A transactions for the target company to grant deal protection measures (eg, pay a break fee, matching rights, force-the-vote provisions in a merger, non-solicitation provisions).

6.11 Additional Governance Rights

If the bidder cannot obtain 100% ownership of a target as a result of a takeover offer, no additional governance rights with respect to a target are granted to the bidder. However, if 98% or more of the voting rights in a publicly listed company are acquired, either directly or indirectly by any means, alternative de-listing tools such as sell-out and squeeze-out may be explored.

6.12 Irrevocable Commitments

It is not common to obtain irrevocable commitments from the principal shareholders of the target company to tender or support the transaction.

6.13 Securities Regulator’s or Stock Exchange Process

Mandatory and voluntary tender offers are subject to the CMB’s approval, including the offer price for mandatory tender offers. The offer price is not among the elements to be approved by the CMB in the case of a voluntary tender offer. The review process usually takes eight to ten weeks. The regulator establishes the timeline for the tender offer. If there is a competing bid in a voluntary offer, the term of the initial tender offer can be extended until the competing offer’s period expires.

6.14 Timing of the Takeover Offer

Typically, regulatory approvals are obtained prior to taking over the management control, or regulators are notified after the offering periods.

7. Overview of Regulatory Requirements

7.1 Regulations Applicable to a Technology Company

Technology companies may be subject to various regulations and be under the supervision of different Turkish regulators depending on the specific business activities they carry out, as certain activities such as telecommunications, online broadcasting, or payment system services are subject to sector-specific rules. Therefore, the operations should be diligently reviewed to identify the relevant regulatory bodies, applicable regulations, necessary approvals, licences, permits and incorporation criteria. Common Turkish regulators include the Banking Regulation and Supervision Agency (BRSA), the Capital Markets Board (CMB), the Central Bank of Turkey, and the Information and Communication Technologies Authority (ICTA).

7.2 Primary Securities Market Regulators

The CMB is the regulatory and supervisory authority in charge of the securities markets in Turkey.

7.3 Restrictions on Foreign Investments

The fundamental principle underlying Turkey’s investment regulations is “equal treatment” between foreign investments and domestic investments. When investing in a Turkish company, foreign investors are subject to the same requirements as domestic investors. Also, foreign investors are allowed to make direct foreign investments in the country with no restrictions on the repatriation of capital and dividends.

In general, foreign entities may freely establish, acquire and dispose of interests in business enterprises, and the amount of foreign ownership in companies is unlimited. However, a limited number of industry sectors do have restrictions on foreign investment, such as the radio and television, aviation and maritime transport industries. For example, direct foreign shareholders cannot hold more than 50% of the paid-in capital of a media service company and a foreign investor may only be a direct shareholder in a maximum of two media service companies. With respect to aviation, the majority of a company’s share capital must be held by Turkish shareholders.

Foreign direct investment is defined, inter alia, as the establishment of a new company or branch of a foreign company by a foreign investor, or the share acquisition of an existing company (any percentage of shares acquired outside the stock exchange or 10% or more of the shares or voting power of a company acquired through the stock exchange).

Foreign investment in Turkey is no longer subject to prior approval. A standard notification to the General Directorate of Incentive Implementation and Foreign Investment of the Turkish Ministry of Industry and Technology (GDIF) should be made through an online system called E-TUYS within one month following a change in the shareholding structure or share capital of a Turkish company with foreign capital. The notification is required for keeping track of foreign investment statistics in Turkey, and can be completed by an authorised user designated by the company for E-TUYS procedures.

7.4 National Security Review/Export Control

The direct or indirect acquisition of at least 50% of the shares of a Turkish entity by a foreign legal or natural person is subject to a background check if the target owns immovable property in Turkey. Such background check is triggered by the GDIF notification described in 7.3 Restrictions on Foreign Investments.

Upon the notification, the relevant local governorship will automatically initiate the background check on the immovable property to determine whether the indirect foreign ownership of such property is a threat to national security (which usually depends on whether the property is located in a military, security or strategic zone). If the governorship concludes that such an ownership may pose a national risk, the company may be required to divest the property. The background check cannot be cleared out in advance of closing. It is carried out automatically and is not notified to the transaction parties. If, as a result of the background check, no national security concerns are identified, no separate clearance is issued in this regard.

7.5 Antitrust Regulations

In case an acquisition or merger transaction results in a permanent change of control, such transaction requires the prior approval of the Turkish Competition Authority (TCA) if one of the following turnover thresholds is met:

• the aggregate Turkish turnover of the transaction parties is TRY750 million (approximately EUR29.2 million) and the Turkish turnover of at least two of the transaction parties each exceeds TRY250 million (approximately EUR9.7 million); or
• in acquisitions, the Turkish turnover of the transferred assets or businesses exceeds TRY250 million and the worldwide turnover of at least one of the other parties to the transaction exceeds TRY3 billion (approximately EUR116.8 million).

There is an exception for acquisitions of “technology undertakings”: the TRY250 million threshold sought for the target entity under the two bullet points above becomes inapplicable if the target can be considered a “technology undertaking” and (i) is active in the Turkish market; (ii) has R&D activities in Turkey; or (iii) provides services to users located in Turkey.

A technology undertaking is broadly defined as “undertakings or related assets operating in the fields of digital platforms, software and game software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies”.

7.6 Labour Law Regulations

In general, Turkish labour laws and policies tend not to distort or impede investments in Turkey. They are considered to be generally in line with similar laws of other European countries and do not allow for protection above and beyond what other countries typically provide. However, they do tend to favour employees, which may make amending or terminating employment contracts challenging.

There is no works council concept in Turkey.

7.7 Currency Control/Central Bank Approval

Turkey has implemented restrictions on the use of foreign currency for contract prices and payment obligations stipulated under certain contracts between Turkish residents. These need to be denominated in Turkish Lira unless an exemption applies. The exemptions include, among others: (i) immovable sale and lease agreements executed as buyer or tenant by Turkish companies in which non-residents directly or indirectly hold 50% or more of the share capital, or which are under the control or joint control of non-Turkish residents; (ii) sale and lease agreements for movables (other than vehicles that are not heavy construction equipment); and (iii) agreements to commission a work which involve costs in foreign currency. The restrictions will need to be carefully reviewed in situations where both parties are resident in Turkey.

There is no generic central bank approval for M&A transactions, except when the target operates under the supervision of the Central Bank of Turkey (eg, payment services companies). In such a case, the transfer is subject to the prior approval of the Central Bank of Turkey.

8. Recent Legal Developments

8.1 Significant Court Decisions or Legal Developments

Communiqué No 2022/2 Amending the Communiqué on the Mergers and Acquisitions Subject to the Approval of the Turkish Competition Board (TCB) (the “Amendment Communiqué”), which entered into force on 4 May 2022, raised the turnover thresholds triggering a merger control filing from TRY30 million to TRY250 million, TRY100 million to TRY750 million, and TRY500 million to TRY3 billion, respectively.

The same Communiqué introduced a Turkey-specific notification requirement for “technology undertakings” that are defined as “undertakings or related assets operating in the fields of digital platforms, software and game software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies”. Accordingly, if the acquired business/company (i) is classified as a “technology undertaking” as defined in the Communiqué, and (ii) is active in Turkey, or has R&D activities or provides services to users in Turkey, the TRY250 million turnover threshold will not apply.

There are still no published guidelines on the application of the technology undertaking exception and therefore, its interpretation relies on the TCB’s published case law. Since the TCB’s reasoned decisions for the filings granted with negative clearance are not published, there is a limited number of decisions published on this matter to date. Based on the decisions so far, the TCB seems to interpret the definition of technology undertaking rather broadly, thus increasing the number of transactions subject to notification pursuant to this criterion.

9. Due Diligence/Data Privacy

9.1 Technology Company Due Diligence

If the controlling shareholder is in favour of the bid, the target can agree on providing due diligence information. There is no legal requirement to provide the same level of information to all bidders. The potential bidder can initially conduct due diligence on publicly available information, and the parties may agree on a limited due diligence exercise for non-public information to be performed at a later stage, focusing on fundamental or material issues only. In practice, however, bidders in Turkey would typically seek to conduct a more thorough and extensive due diligence review once the transaction progresses, even for a public company. This comprehensive due diligence would likely include access to detailed financial, operational, and legal matters to properly assess the risks and opportunities associated with the acquisition. For the legal due diligence, bidders focus on general corporate information, compliance, material agreements, assets, labour and regulatory matters, licences and permits, and material litigation.

If a due diligence request is accepted by the target and/or the majority shareholder, a confidentiality agreement is signed between the parties before initiating the due diligence process. It is also generally expected that the parties sign a term sheet or letter of intent together with the confidentiality agreement before commencing the due diligence. Certain precautions need to be taken to comply with the insider trading regulations, including the adoption of a board resolution by the target company if the parties wish to delay public disclosure of the proposed transaction.

The board may also allow the conduct of technology due diligence. All sharing of information should take into account the restrictions arising from competition law (with the potential need for clean-team protocols) and data protection law, as well as the protection of trade secrets. The failure to adopt adequate precautions to prevent the unauthorised use of the shared information may expose the board to liability for the breach of its fiduciary duties. If the target uses licensed technology protected by intellectual property rights or including proprietary know-how, restrictions on the sharing of technology-related information may also stem from the relevant licence agreements.

9.2 Data Privacy

The guidance of the Turkish Data Protection Authority (DPA) indicates that the review of certain information, including personal data, by a potential buyer in the context of a proposed sale, an acquisition or a change in shareholding structure in order to assess the target company, can be considered to fall within the “legitimate interest” exception allowing the processing of personal data without explicit consent, provided that the sharing of data is proportionate and subject to adopting the necessary security measures.

It is thus possible for personal data held by the target company to be shared with a potential buyer as part of due diligence activities within the scope of this exception to consent without breaching the Turkish personal data protection laws. However, only the personal data that is strictly necessary to the potential buyer’s assessment should be shared, subject to a confidentiality agreement applicable to all those who will gain access to the data, and subject to the adoption of appropriate technical measures to protect the data against unauthorised access. In addition, given the constraints surrounding the mandatory information of data subjects and cross-border transfers of data, it remains advisable to anonymise any personal data shared with a potential buyer to the maximum extent possible. The target company should in any case refrain from sharing any special categories of data (sensitive data) in the context of the due diligence activities (eg, any personal data relating to race, ethnicity, political views, association, foundation or union memberships, health, criminal convictions and safety measures, biometric and genetic data) since such data is subject to additional constraints, and cannot in particular be processed or shared on the basis of the legitimate interest exception described above.

10. Disclosure

10.1 Making a Bid Public

Information, events and developments that can affect the value or price of securities or the investment decisions of investors of a public company must be disclosed to the public. Anyone with information about material events that must be disclosed to the public must keep the information in strict confidence until it has been disclosed. Information, events or developments about a takeover bid or tender offer or merger (for example, signing an agreement, starting negotiations with a counterparty) can be considered to be inside information that must be disclosed to the public, provided that it has an effect on the value of the securities or investors’ decisions. Therefore, each transaction, and each of its steps must be evaluated separately in accordance with the disclosure requirements under the CMB regulations to understand their effects on the price of the securities or investors’ decisions.

As a general rule:

• Disclosure about changes in ownership of shares or management control in a company must be made no later than 9 am Istanbul time on the third business day following the event triggering the disclosure requirement.
• Disclosure about other events, including the disclosure of inside information, must be made immediately upon the occurrence or discovery of the relevant event. If a bidder decides to initiate a bid, it must be made public on the PDP.

A public company can adopt a board resolution in line with the applicable rules to postpone disclosure, preferably right after signing a term sheet or a letter of intent with the bidder.

10.2 Prospectus Requirements

A listed company can only increase its share capital in exchange for cash. For this reason, no prospectus will be required for the issuance of shares in a stock-for-stock takeover offer. However, the buyer can make an exchange offer provided that the securities or stock considerations are listed in the home market.

10.3 Producing Financial Statements

Bidders do not need to produce financial statements in their disclosure documents in a cash or stock-for-stock transaction.

10.4 Disclosure of Transaction Documents

Transaction documents are usually filed with the CMB in mandatory tender offers, but are not disclosed to the public. However, material terms and conditions of the transaction should be disclosed on the PDP.

11. Duties of Directors

11.1 Principal Directors’ Duties

Board members and third parties in charge of management must perform their duties with the care of a prudent manager and protect the company’s interest in good faith. This concept requires board directors and third parties in charge of management to exercise reasonable skill and diligence in performing their duties, which means the care, skill and diligence that would be exercised by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected in carrying out the functions at hand with respect to the company. Apart from fiduciary duties, directors have non-competition and confidentiality obligations; they are prohibited from entering into any kind of transaction with the company without the shareholders’ consent, and from attending meetings where their own interests (or the interests of close relatives) are discussed.

The board may incur civil liability towards the company and the shareholders, as well as the company’s creditors, provided there is a sufficient causal link between the director’s negligent act or omission and the loss. This liability would not, however, apply to malpractice, breach of law or breach of the company’s articles of association due to events outside the control of the persons involved.

11.2 Special or Ad Hoc Committees

Listed companies are required to establish certain mandatory board committees, such as an audit committee, corporate governance committee and early risk detection committee. Turkish law does not require the establishment of special or ad hoc committees in M&A transactions.

11.3 Board’s Role

The target’s board is not expected to be actively involved in negotiations, but would have to adopt certain resolutions to approve the transaction (to the extent required by the articles of association of the target), or resolve on the annotation of the share transfer into the share ledger, in order to make the transaction enforceable against the company.

Shareholder litigation challenging board decisions in M&A transactions is relatively uncommon, typically only arising from pre-existing shareholder disputes or minority shareholder grievances.

11.4 Independent Outside Advice

It is common for directors or selling shareholders to obtain independent financial advice in a takeover or business combination. A fairness opinion can be obtained upon the directors’ request, but is not systematic depending on the nature of the target and form of the transaction. Certain transactions, such as mergers, spin-offs and contributions in kind, would require a sworn auditor’s report in accordance with applicable law.