Mergers and Acquisitions (M&A) Law in Turkey: Transaction Structures, Due Diligence, Competition Approval, and Foreign Investor Guide

Mergers and acquisitions in Türkiye are primarily governed by the Turkish Commercial Code No. 6102, the Foreign Direct Investment Law No. 4875, and the Law on the Protection of Competition No. 4054. Foreign investors enjoy 100% equal treatment with domestic investors, allowing full ownership of Turkish companies without prior government screening in most sectors—provided that comprehensive legal due diligence, Share Purchase Agreements (SPA), Competition Authority merger control thresholds, and Trade Registry filings are executed with precision.

Türkiye’s strategic geographic location connecting Europe, Asia, and the Middle East, combined with its dynamic industrial base and startup ecosystem, makes it a prime hub for cross-border mergers, corporate acquisitions, and joint ventures. However, acquiring shares in a Turkish company or executing a statutory corporate merger requires navigating strict corporate governance rules, hidden tax or labor liabilities, competition clearance thresholds, and regulatory sector approvals.

At Cosmos Legal Law Firm, we advise international corporations, private equity funds, venture capital investors, and Turkish business owners through every phase of M&A transactions—from preliminary non-disclosure agreements and legal due diligence to drafting Share Purchase Agreements, obtaining Competition Authority clearances, and completing Trade Registry closings.

1. Core M&A Transaction Structures Under Turkish Law

Under Articles 134 to 158 of the Turkish Commercial Code No. 6102, M&A transactions in Türkiye are structured through three primary legal mechanisms:

• Share Acquisition (Share Deal): The buyer acquires existing shares (or subscribes to newly issued shares via a capital increase) of a Turkish Joint Stock Company or Limited Liability Company. In Joint Stock Companies, transferring registered shares requires share endorsement and physical delivery (with board approval if transfer restrictions apply), whereas transferring shares in a Limited Liability Company requires a notarized Share Transfer Agreement, General Assembly approval, and registration in the Trade Registry.
• Asset Acquisition (Asset Deal): Instead of buying shares of the target company, the buyer acquires specific commercial assets, real estate, intellectual property, machinery, or an entire commercial enterprise. Under Article 202 of the Turkish Code of Obligations No. 6098, transferring a commercial enterprise entails 2 years of joint and several liability between the seller and buyer for pre-existing enterprise debts.
• Statutory Corporate Merger (Birleşme): Two or more companies merge either by acquisition (one company absorbs another) or by forming a new company, transferring all assets and liabilities universally without liquidation, subject to creditor protection announcements and Trade Registry registration.

2. Step-by-Step M&A Execution Process in Türkiye

A well-structured M&A transaction in Türkiye follows five sequential stages:

1. Preliminary Phase (NDA, LOI / Term Sheet): Parties execute a binding Non-Disclosure Agreement (NDA) to protect trade secrets and sign a Letter of Intent (LOI) or Memorandum of Understanding outlining indicative valuation, exclusivity periods, and deal milestones.
2. Comprehensive Legal, Tax, and Financial Due Diligence: Before signing binding purchase contracts, legal counsel conducts an in-depth audit of the target company’s corporate records in the Turkish Trade Registry Gazette, commercial contracts, real estate titles, intellectual property, ongoing lawsuits, employment liabilities (unpaid overtime/severance exposure), and tax/social security compliance.
3. Drafting and Negotiating Transaction Documents:
   • Share Purchase Agreement (SPA) / Share Subscription Agreement (SSA): Defines purchase price adjustments (closing accounts vs. locked-box mechanisms), conditions precedent, representations and warranties, indemnification caps, and dispute resolution (such as ISTAC or ICC international arbitration).
   • Shareholders’ Agreement (SHA): Governs post-closing management control, board representation, reserved matters, drag-along/tag-along rights, put/call options, and non-compete obligations.
4. Regulatory Approvals and Merger Control Clearance: Obtaining mandatory pre-closing clearances from competition and sectoral authorities.
5. Closing and Trade Registry Registration: Executing share transfers, paying the purchase price (often via bank escrow mechanisms), updating the company’s Share Ledger, and registering board/management changes with the relevant Trade Registry Directorate via MERSİS (Central Registry Recording System).

3. Competition Authority Approval (Merger Control Rules)

Under Article 7 of the Law on the Protection of Competition No. 4054 and Communiqué No. 2010/4 enforced by the Turkish Competition Authority, M&A transactions resulting in a permanent change of control require mandatory prior approval if the parties’ turnovers exceed statutory thresholds:

• Turnover Thresholds & Technology Undertaking Exception: Transactions exceeding specified Turkish and global turnover limits cannot legally close until approved by the Competition Board. Furthermore, for acquisitions involving technology undertakings (companies active in digital platforms, software, gaming, financial technologies, biotechnology, pharmacology, agrochemicals, or health technologies operating in Türkiye), the local Turkish turnover threshold is waived—meaning even early-stage tech acquisitions by large global buyers require mandatory Competition Authority clearance.
• Gun-Jumping Penalties: Closing a notifiable transaction without prior Competition Board approval renders the transaction legally invalid and exposes the acquiring party to heavy administrative fines calculated on annual gross turnover.

4. Foreign Direct Investment Rules and Sector-Specific Approvals

Under the Foreign Direct Investment Law No. 4875, foreign investors enjoy strong statutory protections:

• National Treatment and Free Repatriation of Profits: Foreign investors can acquire up to 100% of shares in Turkish companies without prior government screening in general commercial, industrial, and technology sectors, and have the unrestricted right to transfer dividends, sale proceeds, and liquidation funds abroad through Turkish banks.
• Regulated Sectors Requiring Prior Regulatory Consent: Acquisitions in specific regulated industries require prior approval from relevant supervisory bodies—such as the Banking Regulation and Supervision Agency (banking/finance), the Energy Market Regulatory Authority (energy/electricity/gas), the Capital Markets Board (publicly traded companies and brokerage firms), the Information and Communication Technologies Authority (telecom), and the Insurance and Private Pension Regulation and Supervision Agency (insurance).
• Real Estate Ownership Review for Foreign-Controlled Companies: Under Article 36 of the Land Registry Law No. 2644, if a foreign investor acquires 50% or more of a Turkish company that owns real estate in Türkiye, the Governorate conducts a security/military zone review to confirm the company’s continued real estate holding eligibility.

Frequently Asked Questions (FAQ)

• Is it better to acquire a Joint Stock Company or a Limited Liability Company in Turkey?
  For M&A transactions and foreign investors, a Joint Stock Company offers major legal advantages: share transfers do not require notarization or Trade Registry registration, shareholders are not personally liable for unpaid public tax/SGK debts of the company (unlike Limited Liability Company shareholders), and capital gains from selling shares held for more than 2 years are exempt from income tax for individual shareholders.
• Can foreign parties choose foreign law and international arbitration in a Share Purchase Agreement?
  Yes. Under the International Private and Procedural Law No. 5718, parties to a cross-border M&A transaction may freely select foreign governing law (such as English or Swiss law) for the Share Purchase Agreement and resolve disputes via international arbitration (such as ICC, LCIA, or ISTAC), while mandatory Turkish corporate and Trade Registry rules continue to govern the share transfer mechanics itself.
• How long does an M&A transaction typically take in Turkey?
  A straightforward private share acquisition not requiring Competition Authority clearance typically takes 4 to 8 weeks (covering due diligence, contract negotiation, and closing). If Competition Board Phase I clearance or sectoral regulatory approval is required, the timeline generally extends to 2 to 4 months.

Conclusion and Professional Legal Support

Executing a successful merger or acquisition in Türkiye requires thorough legal due diligence, carefully structured Share Purchase and Shareholders' Agreements, proactive Competition Authority merger control compliance, and seamless Trade Registry execution. Proper legal structuring protects investors against hidden liabilities while maximizing tax efficiency and post-closing governance control.

For comprehensive legal due diligence, drafting Share Purchase and Shareholders' Agreements, Competition Authority merger control filings, sectoral regulatory approvals, and end-to-end M&A closing representation in Türkiye, contact Cosmos Legal Law Firm and follow our @cosmoslegal.global Instagram account for regular legal updates.