ARTICLE
27 May 2025

Technology M&A Comparative Guide

E
Egemenoglu

Contributor

Egemenoglu is one of the largest full-service law firms in Turkey, advising market-leading clients since 1968. Egemenoğlu who is proud to hold many national and international clients from different sectors, is appreciated by both his clients and the Turkish legal market with his fast, practical, rigorous and solution-oriented work in a wide range of fields of expertise. Egemenoğlu has been considered worthy of various rankings by the world’s most leading and esteemed rating institutions and legal guides. We have been ranked as Recognized in “Project and Finance” and “Mergers and Acquisitions” areas by IFLR 1000. We also take place among the top- tier law firms of Turkey at the rankings of Legal 500, at which world’s best law firms are regarded, in “Employment Law” and “Real Estate / Construction” areas. Also our firm is regarded as significant by Chambers& Partners in “Employment Law” area as well.
Technology M&A Comparative Guide for the jurisdiction of Turkey, check out our comparative guides section to compare across multiple countries.
Turkey Corporate/Commercial Law

1. Legal and regulatory framework

1.1 Which legislative and regulatory provisions govern M&A activity in your jurisdiction?

M&A transactions in the Turkish legal system are primarily governed by the Commercial Code. According to the code, companies may engage in a merger through either:

  • the acquisition of one company by another ('merger by acquisition'); or
  • merger into a new company ('merger by new incorporation').

Through completion of a merger, the acquirer acquires the assets, rights and obligations of the acquired company without any liquidation process.

On the other hand, acquisitions take the form of either an asset deal or a share deal. Again, the Commercial Code mainly regulates the structure of share deals. Share deals can be conducted in the following forms:

  • The shares are transferred from the existing shareholder to:
    • a third party which is not a shareholder in the company; or
    • the remaining shareholders; or
  • A third party, which is not a shareholder in the company, injects share capital into the company and thus acquires shares representing the company's share capital through subscription.

In an asset deal, the acquirer acquires certain assets, liabilities or rights from the target. In this scenario, unlike in the case of a merger, the target will continue to exist with its remaining assets and other rights and obligations.

1.2 What special regimes apply to technology M&A transactions in your jurisdiction?

Technology M&A transactions are not specifically governed under Turkish law; they are subject to the general framework of the Commercial Code and other relevant legislation. However, given the unique characteristics of the technology sector, specific regulations and considerations often apply, including the following:

  • Industrial Property Law (6769): Companies active in technology typically possess valuable IP assets, such as patents, trademarks, copyrights and trade secrets. In this respect, the Industrial Property Law governs the registration, transfer and protection of patents, trademarks and designs.
  • Law on the Protection of Personal Data (PPP) (6698): Businesses in the technology sector often handle vast amounts of personal data. The Law on PPD applies to companies that processing and transferring personal data. During the acquisition process, the purchaser must ensure compliance with the law's requirements, as non-compliance can lead to substantial penalties. Transactions involving companies with cross-border data processing may also require adherence to international data protection standards, such as the EU General Data Protection Regulation, if applicable.

In summary, technology M&A transactions in Türkiye require that meticulous attention be paid to sector-specific regulations – particularly IP, data protection and competition rules – along with careful structuring to address industry-specific challenges.

1.3 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have and what kinds of transactions do these powers apply to?

Some technology transactions may trigger the need for regulatory clearance, as follows.

Competition law: As mergers and acquisitions may significantly limit competition in the market, acquisitions may lead to a narrowing of the competitive environment, as the control of undertakings with competitive potential in the market is acquired by undertakings with high market power. In that respect, the Turkish Competition Authority has the authority to supervise mergers and acquisitions.

Communiqué 2010/4 on Mergers and Acquisitions Requiring Authorisation from the Competition Board provides that the authorisation of the Turkish Competition Authority may be required in order for the following transactions to have legal validity:

  • the merger of two or more undertakings; or
  • the acquisition of direct or indirect control over all or part of one or more undertakings by one or more undertakings or by one or more persons that currently control at least one undertaking through the purchase of shares or assets, through a contract or through any other means, resulting in a permanent change in control.

Pursuant to Article 7 of Communiqué 2010/4, the authorisation of the Turkish Competition Authority is required if either of the following thresholds is met:

  • The total turnovers of the transaction parties in Türkiye exceed TRY 750 million and the turnovers of at least two of the transaction parties in Türkiye each exceed TRY 250 million; or
  • One of the transaction parties has a global turnover exceeding TRY 3 billion and:
    • In case of an acquisition, the asset or activity that is the subject of the acquisition has a value exceeding TRY 250 million; or
    • In the case of a merger, at least a transaction party has a turnover in Türkiye exceeding TRY 250 million.

However, an exception applies to technology undertakings under the Turkish competition legislation. The concept of a 'technology undertaking' was introduced to Communiqué 2010/4 through an amendment enacted on 4 March 2022 which provides that in the case of transactions regarding the acquisition of technology undertakings operating in the geographical market of Türkiye or conducting research and development or providing services to users in Türkiye, the TRY 250 million threshold will not apply.

The Turkish Competition Authority has the power to:

  • review and approve, conditionally approve or block transactions to prevent anti-competitive effects;
  • impose remedies or conditions to mitigate competition concerns; and
  • levy administrative fines for failure to notify or implement a transaction before clearance.

Sector-specific licences: For technology companies operating in regulated sectors (eg, telecommunications, fintech), the transfer of licences or operational approval may be required under sector-specific regulations.

The following bodies have the power to grant or deny transaction approvals and impose specific conditions based on sector-specific laws:

  • the Banking Regulation and Supervision Agency for financial institutions;
  • the Energy Market Regulatory Authority for energy companies;
  • the Information and Communication Technologies Authority for telecommunications companies; and
  • the Ministry of Treasury and Finance for insurance companies.

Capital Markets Board (CMB): M&A deals involving publicly traded companies:

  • may be subject to mandatory tender offers; and
  • are subject to disclosure requirements and rules protecting minority shareholders.

The CMB has the power to:

  • approve mandatory tender offers and exemptions;
  • ensure proper disclosure to investors; and
  • investigate and sanction breaches of the capital markets regulations, including insider trading or market manipulation

1.4 Does the government have the power to intervene in technology M&A transactions in your jurisdiction? If so, what is its general approach in doing so?

The government has the power to intervene in technology M&A transactions under specific legal frameworks, primarily through the Turkish Competition Authority and sector-specific regulatory bodies. The government typically aims to foster a competitive environment and safeguard consumer interests. For technology deals, the Turkish Competition Authority scrutinises issues such as:

  • the creation or strengthening of a dominant position;
  • restriction of innovation through reduced competition; and
  • risks relating to data privacy and control over critical technologies.

2. Deal structure

2.1 How are technology M&A transactions typically structured in your jurisdiction?

As mentioned in question 1.1, in the Turkish legal system, M&A transactions are mainly governed by the Commercial Code and there are no specific provisions governing technology M&A transactions. In this respect, technology M&A transactions in Türkiye are typically structured as:

  • share deals;
  • asset purchases; or
  • joint ventures.

In the Turkish M&A market, the most common structure for technology M&A transactions is a share deal (through either a share transfer or subscription to the share capital of a company).

2.2 What are the potential advantages and disadvantages of the available structures?

Structure Advantages Disadvantages
Share deal
  • The purchaser can acquire full control together with all assets, employees, intellectual property and existing customers and suppliers.
  • If the target is a joint stock company, under certain conditions, the share transfer process may be exempt from income tax and stamp tax.
  • The legal entity of the target remains intact, ensuring continuity in contracts, customer relationships and licences.
  • Turkish Competition Authority and sector-specific approvals may delay the transaction.
  • The post-integration process may be challenging, as the acquirer needs to align with the target and harmonise their daily business processes.
  • Extensive due diligence processes involve greater time and effort.
  • Purchasers inherit all liabilities (known and unknown), including tax obligations, litigation risks and employee claims. (Therefore, extensive due diligence is essential.)
  • In case of a change of control, the agreements signed by the target with the third parties may include a change of control provision requiring the counterparties' approval for consummation of the transaction.
Asset deal
  • The liabilities can be excluded via non-transferred assets.
  • The purchaser can acquire only the valuable assets for its business (eg, intellectual property, customer databases), while avoiding unwanted ones.
  • Ideal for carveouts or acquiring specific business units without purchasing the entire company.
  • Turkish Competition Authority and sector-specific approvals may delay the transaction.
  • Transferring individual assets (eg, intellectual property, real estate, contracts) requires formalities, consents and registrations, which can be time consuming. For instance, for technology M&A transactions, the transfer of intellectual property can be challenging, especially if various IP rights of the target have been registered under different jurisdictions.
  • Asset transfers may trigger transactional taxes.
  • The agreements signed by the target with third parties may include a change of control provision requiring the counterparties' approval for consummation of the transaction.
  • Employees may need to be terminated and rehired, triggering severance payment obligations.
Merger
  • Combines resources and operations into a single legal entity, streamlining management and reducing redundancies.
  • In some cases, mergers may qualify for tax-neutral treatments.
  • Strengthens the combined entity's market position and operational efficiency.
  • Requires compliance with Commercial Code provisions, shareholder approvals and potential Turkish Competition Authority clearance.
  • Legal, tax and operational integration can take some considerable time.

2.3 What formal and substantive requirements must be met to transfer legal title to assets and shares in a technology M&A transaction?

Formal requirements:

Share deal:

  • Transfer of the shares: In case of an acquisition of the shares representing the share capital of a joint stock company (JSC), the formal requirements vary depending on the type of shares and whether they are printed. Under Turkish law, JSC shares are classified as either registered shares or bearer shares:
    • If registered shares representing the share capital of the company are printed, the printed share certificates must be endorsed and delivered to the acquirer; and
    • If bearer shares representing the share capital of the company are printed, the printed share certificates must be delivered to the acquirer.
  • Where printed shares exist, a written agreement is not obligatory as per the Commercial Code. However, if the shares representing the target are not printed, a written share purchase agreement must be executed between the transferor and transferee.
  • Board resolution: Depending on the target's articles of association, a board of directors' resolution may be required in order to effect the share transfer.
  • Share capital increase: If the investment takes the form of a share capital injection to the target's share capital, a general assembly meeting must be convened.
  • Regulatory approval: Depending on the sector, obtaining regulatory approval may be mandatory (eg, competition approval).

Asset deal:

A comprehensive asset purchase agreement (APA) or similar contract should be executed, detailing the assets being transferred, the purchase price and other key terms. The APA should clearly list the assets being transferred, such as:

  • intellectual property;
  • software;
  • hardware;
  • customer lists; and
  • contracts.

The transfer of specific type of assets (eg, trademarks) may require a notarisation or registration process.

Technology M&A deals may require approval from sector-specific regulators, particularly if the assets include licensed technologies. The Turkish Competition Authority may need to approve the transaction if it has a significant market impact.

Merger: There must be a merger agreement between the transferor and transferee, including the details of the rights, assets and obligations transferred.

Substantive requirements:

  • For a share deal, a written share purchase agreement (SPA) is essential, outlining the terms and conditions of the share transfer, including:
    • the purchase price; and
    • representations, warranties and indemnities.
  • The SPA should clearly specify the number, class and rights attached to the shares being transferred.
  • Financial, legal and operational due diligence should be conducted to confirm the target's condition, including its:
    • liabilities;
    • assets; and
    • compliance with laws.
  • Any shareholder agreements or company-specific restrictions – such as rights of first refusal, pre-emptive rights or tag-along/drag-along rights – should be identified and waivers or consents should be obtained from existing shareholders where necessary.
  • If the technology assets include hardware, compliance with environmental laws or export control regulations should be ensured where applicable.

2.4 What specific considerations should be borne in mind in relation to cross-border technology M&A transactions?

Cross-border technology M&A transactions are often more complex and multi-factor. In the case of cross-border technology M&A, due diligence should include an in-depth examination of the technology and products owned by the companies. Software codes, patent rights, product development processes and R&D investments should be carefully evaluated; and the validity of patents, licensing agreements and potential IP litigation should be taken into consideration during the due diligence process. In the technology sector, IP property rights will be particularly relevant as a significant portion of the assets will consist of patents, trademarks and software. Therefore, the IP laws applicable in different jurisdictions in which the parties to the transaction operate will need to be carefully considered. In addition, as data security and cyber threats may also pose a major risk in technology M&A deals, the parties' cybersecurity measures and compliance with country policies on personal data should be reviewed.

3. Due diligence

3.1 What due diligence should the acquirer conduct into the following aspects of a technology target?

Every M&A transaction is unique. This is complicated by the fact that most technology companies are startups, each with a very different focus due to the liberal, innovative and dynamic nature of such companies. Therefore, it is not possible to provide a complete list for every scenario and the following answers may not cover all aspects that an acquirer should consider during due diligence.

(a) Intellectual property (registered and unregistered)

  • Confirm that the target owns the IP assets, such as patents, copyrights, trademarks, trade secrets and software.
  • Review agreements such as employment agreements, consultant agreements and contractor agreements to ensure that intellectual property created by employees or third parties has been properly assigned to the target.
  • Check whether the intellectual property is subject to any liens, security interests or other encumbrances.

(b) Software

  • Review software development agreements, maintenance agreements and service-level agreements for obligations and liabilities.
  • Confirm ownership of proprietary software and verify proper licensing for third-party and open-source software.
  • Check compliance with licence terms, particularly for open-source components, to avoid liability or commercialisation restrictions.

(c) Cybersecurity

  • Review IT policies, systems and privacy procedures.
  • Ensure that employment agreements, third-party agreements and consent forms are aligned with cybersecurity policies and practices.

(d) Data protection/privacy

  • Confirm compliance with applicable data protection regulations.
  • Verify the existence of valid legal bases for data processing and appropriate transfer mechanisms,
  • Investigate any history of data breaches, their consequences and mitigation.

(e) Financial

  • Examine the financial status and health of the target to ensure that it is not facing any financial difficulties.
  • Verify the accuracy of its financial statements.

(f) Employment

  • Review employment agreements and practices to determine whether there will be any changes in employment terms or practices that could give employees the right to terminate their contracts for cause and potentially result in:
    • additional severance or compensation obligations for the target; and,
    • in the case of an asset acquisition, the transfer of all existing employment agreements to the acquirer with all rights and obligations.
  • Review employment agreements and practices to ensure compliance with Turkish labour law.
  • Review whether there are any stock option rights and the agreements granted to employees.

(g) Tax

  • Assess the target's compliance with corporate tax filings and payment obligations in all operating jurisdictions.
  • Evaluate eligibility for tax incentives or credits for:
    • research and development;
    • innovation; and
    • technology exports.

(h) Environmental, social and governance (ESG)

  • Assess compliance with environmental regulations and the company's environmental policies.
  • Review governance structures, including:
    • board composition;
    • ethical policies; and
    • anti-bribery measures.

(i) Litigation

  • Investigate ongoing or historical litigation, arbitration or regulatory investigations.

(j) Other

  • Analyse all material contracts for:
    • change-of-control clauses;
    • exclusivity; or
    • termination rights.
  • Assess compliance with obligations under technology vendor or customer agreements.

3.2 How is technology used to facilitate due diligence in a technology M&A transaction?

Technology plays a crucial role in facilitating due diligence in technology M&A transactions by streamlining the collection, organisation and analysis of vast amounts of data. Virtual data rooms enable secure and remote access to confidential documents, allowing multiple parties to review materials simultaneously while maintaining strict access controls. Advanced search functionalities, AI-powered document review tools and data analytics help to identify key legal, financial and operational risks more efficiently. Additionally, specialised due diligence platforms can automate checklist tracking, flag anomalies and ensure compliance with regulatory requirements, ultimately:

  • accelerating the overall transaction timeline; and
  • enhancing decision-making accuracy.

3.3 What concerns, considerations and best practices should the acquirer bear in mind when conducting due diligence in a technology M&A transaction?

In a technology M&A transaction, the target must ensure a well-prepared and organised due diligence process to protect its value and mitigate risks. Confidentiality is paramount and the target should implement secure data-sharing practices, including setting up a virtual data room with indexed, complete and accurate documentation. Key focus areas include IP ownership – the target should:

  • ensure proper registration and assignment of patents, trademarks and copyrights; and
  • verify compliance with software licensing agreements.

Financial transparency is equally critical – the target should:

  • provide clear and accurate financial statements;
  • highlight sustainable revenue streams; and
  • resolve any outstanding liabilities.

Addressing regulatory compliance, particularly sector-specific regulations, and reviewing material contracts for change-of-control provisions are also vital to prevent disruptions post-transaction.

Moreover, the target should prioritise cybersecurity and data protection by:

  • conducting risk assessments;
  • strengthening security measures; and
  • ensuring compliance with data privacy laws.

Employee retention and cultural compatibility are significant considerations; clear communication plans and retention incentives for key personnel can help to maintain stability. Transparency about potential risks, coupled with proactive mitigation strategies, builds trust with the acquirer. Engaging legal and compliance experts for pre-emptive audits and using non-disclosure agreements to safeguard sensitive information further enhance the process. These measures enable the target to present a strong, credible position and facilitate a smoother, more successful transaction.

4. Stakebuilding

4.1 Can the acquirer build up a stake in a technology target before and/or during the deal process with a view to increasing its prospects of success? If so, what disclosure obligations apply in this regard?

The acquirer may acquire a stake in the target before or during the deal. For example, the acquirer may acquire a stake by making a specific investment or through option agreements when making deals for the potential acquisition of the target. This can provide control until the deal is completed.

If the acquirer is a shareholder of the target, a number of disclosure obligations may arise. These obligations are often shaped by legislation, such as competition regulations and commercial law, and can be outlined as follows:

  • If the target is a public company and the acquirer reaches a certain shareholding, a disclosure obligation arises within the meaning of the capital markets legislation. In such case, the acquirer may be required to:
    • obtain approval from the capital markets authority; and/or
    • make a notification on the public disclosure platform.
  • If the acquirer's acquisition of shares in the target creates a situation that has the potential to prevent competition, it may trigger competition law regulations. In this case, the transaction in question may mean that a certain market share is reached and the acquirer may thus need to obtain approval from the Turkish Competition Authority.
  • If any of the parties to an acquisition are group companies and the acquirer reaches a certain shareholding, a disclosure obligation arises within the meaning of the Commercial Code.
  • If the target becomes a sole shareholding company upon completion of an acquisition, a disclosure obligation arises within the meaning of the Commercial Code.

4.2 What other legal and regulatory considerations should be borne in mind in relation to stake-building in a technology target?

In addition to disclosure obligations, acquirers building a stake in a technology target should consider competition law implications, particularly regarding market concentration and potential antitrust filings. They must also comply with public offer rules, which may trigger mandatory offers if a certain threshold is crossed; and avoid insider trading or market abuse by ensuring that there is no trading on material non-public information. Additionally, shareholder agreements and corporate governance rules must be reviewed to ensure that there are no violations of restrictions or voting rights; and foreign investment regulations may apply, particularly in sensitive sectors. Furthermore, where intellectual property is transferred as a part of an asset deal, the transfer process may need to be completed before the Patent and Trademark Office. Finally, acquirers must be mindful of fiduciary duties and conflicts of interest, ensuring that actions do not disadvantage minority shareholders or the target's management.

5. Representations and warranties

5.1 What representations and warranties are typically made in technology M&A transactions in your jurisdiction?

The representations and warranties in technology M&A transactions primarily focus on IP, technology, data protection and regulatory compliance. The seller typically:

  • warrants ownership of all intellectual property, ensuring that patents, trademarks, copyrights and trade secrets are free of third-party claims or encumbrances;
  • confirms:
    • compliance with licensing terms, particularly for open-source software; and
    • the functionality, security and scalability of the relevant technology; and
  • makes data protection representations:
    • addressing adherence to laws such as the General Data Protection Regulation; and
    • confirming that there have been no breaches or unresolved cybersecurity vulnerabilities.

Employment-related representations ensure:

  • the proper assignment of intellectual property created by employees or contractors; and
  • the absence of disputes concerning non-compete or confidentiality agreements.

These representations and warranties are essential for the acquirer to assess risks and protect the integrity of the company's technology assets and operations.

5.2 Does the survival period of representations and warranties vary depending on the type of representation or warranty?

In M&A transactions, the duration of the validity of representations and warranties may vary, generally depending on:

  • the type of representation or warranty involved; and
  • the specific terms of the M&A agreement.

Therefore, the validity period for each type of representation and warranty may be different. For instance:

  • longer validity periods may be set for representations and warranties that involve greater risk or complex issues; and
  • some legal regulations may require longer protection of certain matters (eg, tax and environmental authorisation issues).

In the Turkish market, representations and warranties related to intellectual property are usually covered under the general representations and warranties and limited to the specified survival periods. However, in technology M&A transactions, representations and warranties specifically related to intellectual property are essential. Accordingly, depending on the current situation of the target, the acquirer may consider setting a specific survival period for the representations and warranties related to intellectual property.

5.3 What are the typical consequences of breach of the representations and warranties in a technology M&A transaction?

Breaches of representations and warranties in a technology M&A transaction can result in a variety of legal and financial consequences. These include claims by the acquirer for damages to compensate for any losses that it has suffered as a result. In addition, in the event of a breach, the acquirer may be entitled to terminate the agreement or renegotiate the terms of the transaction, particularly if the breach is material. A breach may result in a reduction or partial refund of the purchase price – for example, if the target's financial condition or technological infrastructure is not as warranted. In addition, breaches may force the acquirer to initiate legal proceedings, litigation or mediation, which may result in a time-consuming and costly process between the parties.

5.4 What are the prevailing trends with regard to the use of representation and warranty indemnity insurance in technology M&A transactions in your jurisdiction?

The use of warranty and indemnity insurance in technology M&A transactions in Türkiye has increased in recent years. This trend is particularly prominent in deals involving high-growth sectors such as artificial intelligence, software development and cybersecurity, where the value of intangible assets (eg, intellectual property and data) is critical. Warranty and indemnity insurance allows a party (usually the acquirer) in M&A transactions to indemnify a party for losses that may occur due to a breach of representation and warranties or a problem with the target. Especially in risk-bearing investment areas (eg, early-stage technology companies and startups), this type of insurance is used to ensure trust between the parties and minimise potential disputes.

In Türkiye, warranty and indemnity insurance adoption is gradually increasing, particularly in cross-border deals involving international purchasers and private equity investors. This shift is driven by a desire to mitigate the risks associated with regulatory compliance, data protection and potential IP disputes, which are common concerns in technology transactions. Policies are tailored to cover key areas such as:

  • IP ownership;
  • cybersecurity breaches; and
  • data privacy compliance.

However, the cost and availability of warranty and indemnity insurance can vary depending on the complexity and risk profile of the transaction, leading parties to carefully weigh the benefits against the premium costs.

6. Deal process

6.1 What documents are typically executed in the initial preparatory stage of an M&A transaction?

The first stage of the M&A process begins with the parties notifying each other of their intention with respect to the transactions mentioned in question 1.1. This is a critical phase, when the fundamental elements for protecting the interests of the project and the parties are established. During this phase, the parties sign a non-disclosure agreement before starting negotiations. This agreement ensure that:

  • the parties will protect each other's trade secrets; and
  • information shared during negotiations will remain confidential.

Especially in highly competitive sectors, confidentiality is vital. Once the negotiations between the parties have been initiated, a letter of intent, memorandum of understanding or term sheet is usually drafted if the parties are progressing in a harmonious manner. These legal instruments, which are used prior to the final agreement, are generally non-legally binding documents that express the parties' intention to merge or acquire, but do not commit to finalisation of the legal transaction. These documents are essentially considered as negotiation agreements and are alternatives to each other.

6.2 Are pre-signing market checks required in your jurisdiction?

Pre-signing market checks are not legally required in Türkiye. However, parties involved in M&A transactions often conduct voluntary market assessments to evaluate competition risks and potential regulatory obstacles. Although Turkish law does not mandate such checks, parties sometimes perform internal market assessments to:

  • evaluate purchaser interest;
  • test valuation expectations; or
  • anticipate potential regulatory issues.

In deals where the target holds a significant market position, merger control filings with the Turkish Competition Authority may be necessary; but even in those cases, pre-signing market checks remain optional.

6.3 Are pre-signing exclusivity agreements typically entered into in your jurisdiction?

Pre-signing exclusivity agreements can be entered into depending on the parties' mutual agreement. It is common practice for the parties involved in M&A transactions to include exclusive provisions in a letter of intent, a memorandum of understanding or a term sheet to prevent the seller from negotiating with other potential purchasers for a defined period. Such agreements help to facilitate due diligence and transaction negotiations by providing certainty to both parties. However, there is no legal requirement to enter into an exclusivity agreement before signing. Whether to include such provisions, and their scope and duration, are entirely subject to negotiation between the parties based on the specifics of the transaction.

6.4 Are break fees permitted in your jurisdiction? If so, under what conditions will they generally be payable? What restrictions or other considerations should be addressed in formulating break fees?

Yes, break fees are permitted under Turkish law, together with certain limitations determined by decisions of the Supreme Court of Appeal. Determining a break fee will release the claimant from the need to prove its claims against the counterparty and the claimant will require damages to be covered. In practice, in M&A deals in Türkiye, acquirers are often keen to determine a break-up fee, especially in case of non-compliance with competition requirements. Additionally, in recent transactions, parties have also introduced break fee protection in case a counterparty does not close the deal.

Under Turkish law, break fees are determined by the parties in line with the principle of freedom of agreement. However, further to the decisions of the Supreme Court of Appeal:

  • the amount of the break fee should be determined in accordance with what is right, just and fair; and
  • in order for the judge to reduce the penalty clause in question, there should be a difference between the damage suffered and/or to be suffered due to breach of agreement and the amount of the penalty clause agreed by the parties that damages the measure of justice and fairness.

6.5 What valuation methods are typically used in technology M&A transactions in your jurisdiction?

In technology M&A transactions in Türkiye, valuation methods are tailored to reflect the unique characteristics of tech companies, such as:

  • high growth potential; and
  • innovative business models.

Common methods include comparable company analysis, which benchmarks the target against similar businesses using metrics such as:

  • enterprise value (EV)/revenue; or
  • EV/earnings before interest, taxes, depreciation and amortisation.

For early-stage companies or startups, the venture capital method is often employed, focusing on projected exit values discounted to their present worth.

Given Türkiye's economic situation, foreign exchange fluctuations often impact valuations, particularly in cross-border M&A transactions. The market's growth potential and scalability are major drivers, with technology companies frequently positioned for regional or global expansion. Investors also assess the target's compliance with regulatory requirements, especially in sectors such as fintech or cryptocurrency.

6.6 What confidentiality obligations apply throughout the various stages of a technology M&A transaction?

In a technology M&A transaction, confidentiality obligations are critical to:

  • protect the parties' strategic information in the transaction process;
  • prevent competition; and
  • avoid damage to business processes.

The confidentiality obligations that apply during the various stages in a technology M&A process are as follows:

  • Initial negotiation phase: In the early stages of the M&A process, when negotiations between the purchaser and seller are starting, a non-disclosure agreement is signed to ensure confidentiality between the parties. This agreement allows the parties to share sensitive information (eg, trade secrets, technological know-how, financial data, business strategies), but prohibits the disclosure of such information to third parties.
  • Due diligence phase: The reports generated and documents reviewed should be:
    • stored in protected data rooms; and
    • labelled as confidential and proprietary.
  • Signing and closing: This stage involves much more in-depth negotiations between the parties. At this stage, the details of the terms of the agreement (eg, price, payment schedule, guarantees, indemnities) are discussed and must be kept confidential.

7. Final transaction documents

7.1 What types of ancillary agreements are typically executed in a technology M&A transaction in your jurisdiction?

In technology M&A transactions in Türkiye, in addition to the main agreements, various ancillary agreements are signed between the parties. These include:

  • a confidentiality agreement, to ensure the protection of confidential information;
  • an indemnity agreement, to enable the parties to seek indemnification against each other in certain circumstances;
  • an employment agreement, to ensure that key employees and executives of the acquired company continue to work for the acquired company;
  • a shareholders' agreement, to regulate the rights and obligations between the shareholders; and
  • an IP agreement, to transfer or license IP rights. An IP agreement is typically seen in technology M&A transactions, as intellectual property is essential for targets.

7.2 What pre and post-closing conditions are typically included in the transaction documents?

Pre-closing conditions: Pre-closing conditions typically focus on ensuring that the transaction can legally and operationally proceed. Common examples include the following:

  • Regulatory approvals: Obtaining necessary consents from regulatory bodies such as the Turkish Competition Authority (if applicable).
  • Corporate approvals: Securing shareholder or board approvals for the transaction, as required by the Commercial Code or the target's articles of association.
  • Third-party consents: Acquiring consents from counterparties to material contracts (eg, key customers, suppliers or licensors), particularly where there are change-of-control clauses.
  • No material adverse change: Verifying that no material adverse event affecting the target has occurred since the agreement was signed.

Post-closing conditions: Post-closing conditions focus on integrating the acquired business and fulfilling any residual obligations between the parties. Examples include the following:

  • Earn-out payments: Payment of additional consideration based on the target's performance metrics (eg, revenue or earnings before interest, taxes, depreciation and amortisation) within a specified period post-closing.
  • Non-compete and non-solicitation covenants: Commitments from the seller to refrain from competing with the acquired business or soliciting employees and clients for a defined period.

Transition services agreements: These are agreements for the seller to provide interim support (eg, IT, HR or operational services) to ensure a smooth transition.

7.3 Are technology-related indemnities included in the transaction documents? If so, what do these typically address?

Yes, in technology M&A transactions, technology-related indemnities are often included in the transaction documents (eg, share purchase agreement, asset transfer agreement). These indemnities are specifically designed to minimise risks related to the target's:

  • technological infrastructure;
  • software;
  • patents;
  • trade secrets; and
  • other technological assets.

As technology is a crucial component in such transactions, indemnification clauses are often included for any misrepresentation, missing information or legal issues related to technology.

7.4 What limitations to liabilities under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

In Turkish M&A transactions, limitations on liability under transaction documents – including those related to representations, warranties and specific indemnities – are typically negotiated to balance the risk allocation between the parties. These limitations commonly include the following:

  • Monetary caps: The seller's liability is usually capped at a certain percentage of the purchase price, with exceptions for specific breaches such as fraud or fundamental warranties (eg, ownership of shares).
  • De minimis and basket thresholds: Claims must exceed a minimum amount (de minimis) and aggregate above a defined basket threshold before the purchaser can seek indemnification, ensuring that minor claims are excluded.
  • Time limitations: Liability is often time bound, with general warranties expiring after certain time period upon the closing; while fundamental warranties (eg, title and ownership) and tax liabilities may have longer survival periods, often aligned with statutory limitations.
  • Knowledge and disclosure: Sellers may limit liability by:
    • asserting that the purchaser had prior knowledge of the breach (eg, through due diligence); or
    • including disclosures that qualify warranties.
  • Specific indemnity: Specific indemnities for known risks (eg, pending litigation or tax issues) often fall outside the general caps and time limits.

7.5 Are earnouts or contingent consideration provisions typically included in the transaction documents? If so, what additional issues do they involve?

Yes, earnouts or contingent consideration provisions are commonly included in transaction documents, particularly in technology M&A deals where the valuation of the target may heavily depend on future performance. These provisions allow a portion of the purchase price to be paid post-closing, based on the target meeting specific financial or operational milestones. While earnouts help to bridge valuation gaps between purchasers and sellers, they often lead to complexities, such as disputes over:

  • performance metrics;
  • accounting standards;
  • post-closing control of the target; and
  • earnout calculation methods.

As a result, detailed drafting and clear definitions in the transaction documents are crucial to avoid future conflicts.

8. Employment issues

8.1 What limitations are applicable to non-compete agreements in your jurisdiction?

In Türkiye, non-compete agreements are subject to specific legal limitations under the Code of Obligations. To be enforceable, the provisions must be proportionate and justified by the employer's legitimate interests. These agreements should be limited in terms of:

  • duration;
  • geographic scope; and
  • the nature of the restricted activities.

Typically, the Turkish courts consider a duration of up to two years as reasonable. If a non-compete clause imposes excessive restrictions on an employee's ability to work, it may be deemed unenforceable. Thus, Article 445 of the Code of Obligations explicitly states that:

A non-compete agreement shall not contain limitations regarding place, time, or type of work that would endanger the employee's economic future in a manner that is unfair, and in general, the duration of the non-compete agreement may not exceed two years, except in special circumstances. The court may limit the scope or duration of an excessively restrictive non-compete agreement by freely evaluating all circumstances and taking into account the counter-performance undertaken by the employer in a fair manner.

8.2 How is employee equity treated in technology M&A transactions in your jurisdiction?

In technology M&A transactions in Türkiye, the treatment of employee equity is governed by:

  • the transaction structure; and
  • Turkish labour law principles.

Employee equity rights, such as stock options, are used to incentivise employees and ensure long-term commitment. These rights are typically governed by the employee's contract or the company's articles of association, granting employees the right to acquire shares after fulfilling specific vesting conditions. In share deals, employee equity rights generally transfer with the business. However, in asset deals, the transfer of equity rights is not automatic and must be explicitly negotiated. The vesting status of stock options plays a significant role in such transactions. Typically, unvested options are forfeited, while vested options may be exercised or subject to buyout, depending on the negotiated terms. Turkish labour law ensures the protection of employee rights during M&A transactions and any changes to employee equity plans must comply with the Code of Obligations, preserving these rights.

8.3 What other key concerns and considerations should be borne in mind by the parties to technology M&A transactions in your jurisdiction from an employment perspective?

In technology M&A transactions in Türkiye, the employment perspective is an important factor. Both parties should carefully consider the impact of M&A transactions on:

  • labour;
  • employee rights;
  • contracts; and
  • operational processes.

The most important considerations in this process are:

  • the protection of employee rights;
  • the fulfilment of legal obligations; and
  • workforce integration.

For instance, during the acquisition, the target's employee contracts (eg, fixed or indefinite-term employment contracts, benefits, salaries) should be reviewed. Parties must also address ownership of intellectual property created by employees, ensuring that employment agreements include clear provisions assigning rights to the employer. Moreover, in technology M&A transactions, it is vital to harmonise the cultures of two companies and increase cooperation between employees, as corporate culture and innovative working environment are of great importance in the technology sector and research and development (R&D) is essential. If, as a result of the merger or acquisition, some critical employees (eg, leaders in the R&D department) are planning to leave the target, this can create difficult situations for the purchaser. Therefore, it is critical for a successful M&A transaction that both parties act in a way that:

  • fulfils their legal responsibilities; and
  • defends the rights of employees.

9. Tax issues

9.1 What key concerns and considerations should be borne in mind by the parties to technology M&A transactions in your jurisdiction from a tax perspective?

In Turkish technology M&A transactions, tax considerations are pivotal to structure the deal effectively. Sellers must consider capital gains tax, with potential exemptions for corporate entities holding shares for over two years. Purchasers should assess the value-added tax (VAT) implications, as share transfers are VAT exempt but asset or IP transfers may attract VAT. Furthermore, share transfer agreements in relation to the shares of a joint stock company or a limited liability company are exempt from stamp tax. Stamp tax and withholding tax on payments to non-residents, subject to double tax treaty benefits, are critical factors in cross-border deals.

Additionally, thorough tax due diligence is crucial to uncover risks such as unpaid liabilities or transfer pricing issues, which can often be mitigated through indemnities or purchase price adjustments. Engaging tax advisers early in the process helps to navigate these complexities and optimise the transaction structure.

10. ESG issues

10.1 What key concerns and considerations should be borne in mind by the parties to technology M&A transactions in your jurisdiction from an ESG perspective?

ESG perspectives have recently become very important in M&A transactions in Türkiye. While the environmental impacts of technology companies are often less directly visible, environmental sustainability has become an important issue. For technology companies, particular attention should be paid to:

  • the ethical use of AI;
  • the sustainability of operations; and
  • governance structures, including cybersecurity and anti-corruption measures.

Non-compliance with Türkiye's evolving ESG-related legal framework, such as environmental protection or data protection laws, can pose significant financial and reputational risks. Parties should also consider the target's ESG policies and practices in due diligence and integrate these into post-closing strategies to align with global ESG benchmarks and stakeholder expectations. Clear representations, warranties and covenants addressing ESG compliance are often included in transaction documents to mitigate risks.

11. Trends and predictions

11.1 How would you describe the current technology M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

The technology M&A landscape in Türkiye remains active despite broader economic challenges, driven by increasing investor interest in digital transformation, fintech, AI and renewable energy technologies. Startups, particularly in sectors such as gaming and blockchain, continue to attract foreign and local investment.

Over the last 12 months, significant deals included acquisitions in fintech and AI, highlighting the growing demand for innovative solutions in financial services and automation. For instance, Getir's acquisition of Germany-based Gorillas showcased Turkish tech companies expanding their global footprint.

11.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

In the technology sector, there is a growing emphasis on ESG considerations. Investors are increasingly prioritising sustainable practices, which is expected to influence M&A activities, with a focus on companies adhering to robust ESG standards. These developments indicate a more stringent regulatory environment and a shift towards sustainability, which will influence technology M&A transactions in Türkiye over the coming year.

12. Tips and traps

12.1 What are your top tips for smooth closing of technology M&A transactions and what potential sticking points would you highlight?

In technology M&A transactions, due diligence should be conducted in close collaboration with legal areas such as personal data protection, competition law and IP law, as technology companies are subject to various permits and regulations. Therefore, we recommend that acquirers engage experienced legal advisers to conduct thorough:

  • legal due diligence, considering the regulatory landscape and associated risks; and
  • financial and tax due diligence.

Furthermore, a common issue in M&A transactions in Türkiye is that the structuring of share transfer and shareholder agreements must comply with the mandatory provisions of the Commercial Code, which restricts their incorporation into the company's articles of association. To effectively handle registration and contractual matters, protect the parties' rights and minimise potential damages for both the purchaser and seller, it is crucial to seek guidance from experienced legal advisers throughout the M&A process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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