May 2025 – Since 2021 there has been a significant surge in IPOs on the Istanbul stock exchange, with 195 listings to date—nearly six times the number of listings during the entire 2015–2021 period. There are now 585 public companies in Turkey with a stock exchange listing. Inevitably, as acquirors seek to consolidate or expand their businesses through M&As, there will be an increase in public M&A transactions. Public M&A deals require an additional toolkit of experience, as in particular, to protect the interests of minority public shareholders, acquisitions of listed companies are subject to further regulation under the Capital Markets Law (the “CML”).
This article focuses on three key areas regarding public company M&As.
Mandatory public disclosure
Mandatory public disclosure rules apply to any public M&A transaction. The relevant provision of the CML provides a general framework, and the Communiqué on Disclosure of Material Events (the “Communiqué”) provides further explanation.
Public disclosure is required for any events and developments that may affect the value and price of capital market instruments or the investment decisions of investors referred to as “material event(s)”. This lays out both the circumstances under which disclosure is necessary and the content it must include. Information must be disclosed if withholding such information could provide an appreciable advantage to those with access to it, so as to ensure equal access to information for all market participants. Conceptually, material events are akin to insider information.
The timing of public disclosure is both one of its most critical and most ambiguous aspects. It is crucial because delays may result in administrative fines, while pre-mature disclosure can negatively impact the transaction or the stock price. The general rule is that disclosure must be made “at the time the intention to buy or sell is concrete”. In practice, however, this has been interpreted broadly, ranging from as early as the appointment of advisors to assess feasibility, to as late as the signing of the term sheet. While the Communiqué and the Guide on Material Events Disclosure (the “Guide”) provide some direction, applying this abstract rule to the specific circumstances of each transaction will be a very fact-based analysis.
The Communiqué also permits the postponement of public disclosure to protect the legitimate interests of the company, provided there is no risk of misleading the public and the information remains confidential during the delay. A common example is when disclosing ongoing negotiations could influence the outcome of those discussions. It is important to note that only the legitimate interests of the company, not those of third parties, are relevant, and that the measure is temporary: disclosure may only be delayed for as long as adequate and necessary precautions can be maintained.
Failure to make mandatory disclosure not only erodes public confidence in the company, thereby adversely affecting value, but also exposes those responsible to administrative fines and, in certain cases, criminal liability for insider trading.
Mandatory tender offer
Under the CML, purchasers acquiring control in a public company are required to make a mandatory tender offer (“MTO”) to purchase the shares of minority shareholders at the same price or higher. This aims to allow the minority shareholders to benefit from the control premium offered by the acquiror to the controlling shareholder(s). It is entirely up to the shareholders to whom the MTO is made whether or not they accept the offer.
Control is deemed to be acquired when a person, alone or acting jointly with others, directly or indirectly holds more than 50% of the voting rights of the company or holds privileged shares granting the right to nominate or appoint the majority of the board members regardless of the percentage of voting rights.
The legislation also provides for certain exceptions or exemptions. While exceptions apply automatically and relieve the purchaser of the MTO obligation, exemption cases require an application to the Capital Markets Board (the “CMB”) for approval. The applicability of either an exception or exemption to a specific case must be assessed on a case-by-case basis under the MTO Communiqué.
The first step in the MTO procedure is to apply to the CMB after the closing of the acquisition; either to initiate the MTO or to seek an exemption. If the exemption application is rejected, the MTO must be launched within one month of the rejection. If the MTO plan is approved by the CMB, it must be initiated within two months of the approval.
The MTO must remain open for a period of 10 to 20 business days. The acquirer is required to disclose the outcome of its MTO application to the CMB and the key details within three business days from the CMB’s decision, as well as the results of the MTO upon its completion.
For listed companies, the MTO price cannot be lower than either (i) the average trading price of the shares over the six-month period preceding the acquisition, or (ii) the highest price paid in the acquisition that triggered the MTO. All payments must be made in cash and denominated in Turkish lira.
Failure to make the MTO within the applicable deadline will result in the suspension of voting rights in addition to administrative fines that go up to the total purchase price of the original acquisition.
Squeeze-out and sell-out options
Both squeeze-out and sell-out rights are triggered when a shareholder, either alone or acting in concert, holding 98% or more of the voting rights in a company, acquires additional shares. This is a much higher threshold than most European countries. These rights provide liquidity options for minority shareholders when a dominant shareholder reaches near full ownership. From the date of such acquisition, minority shareholders have two months to exercise their sell-out right by submitting a written request to the controlling shareholder. Once this two-month period expires, the controlling shareholder must submit a written application to the company in order to be able to exercise any squeeze-out right.
When the sell-out right is exercised, the controlling shareholder is obliged to pay the full purchase price in cash for the shares of the minority shareholders exercising their right. This payment is made to the company, which in turn transfers the funds to the relevant shareholders. Upon completion of the payment, the minority shares are cancelled, and new shares are issued to the controlling shareholder.
The squeeze-out right, on the other hand, may be exercised by the shareholder holding 98% or more of the voting rights, compelling the remaining minority shareholders to sell their shares to the controlling shareholder.
For listed companies, the purchase price under the squeeze-out and sell-out procedures is calculated based on the daily adjusted weighted average of the share prices over the six-month period preceding the acquisition. For non-listed shares, or in cases involving multiple share classes, the price is determined based on a valuation report prepared by an independent valuation firm approved by the CMB.
Summary
In summary, public M&A transactions in Turkey are governed by a comprehensive regulatory framework designed to protect minority shareholders and ensure transparency. Understanding mandatory disclosures, tender offer obligations, and squeeze-out/sell-out rights is crucial for successfully navigating acquisitions of public companies. Expertise and practical experience remain key to achieving smooth and compliant public transactions in Turkey.