TURKEY: An Introduction to Corporate/M&A

Turkish M&A market in numbers: Despite the ongoing economic uncertainties arising from the emergence of new virus variants amid the global pandemic, fluctuations in Turkish Lira and the inflationary environment, the Turkish M&A market continued to build momentum in terms of deal activity, mainly driven by the ease of pandemic restrictions and increasing uptake of COVID-19 vaccination. According to the Deloitte Annual Turkish M&A Review of 2021, the number of deals has reached 390 with a 28% increase compared to 2020, whereas there has been a 12% growth in terms of deal value. In 2021, investors continued to demonstrate a strong interest in technology and mobile services with a spotlight on the e-commerce sector that boosted the overall deal volume with two mega deals (i.e. investments attracted by Trendyol and Getir), followed by online gaming, financial services, energy and manufacturing sectors. In parallel with the systematic increase in financial investor-backed deals in the recent years, financial investors' activity peaked in terms of deal number with 245 transactions that are worth approximately USD4.2 billion. Amid the pandemic and instability in the Turkish economy, foreign investors' interest still remained strong in Turkey and contributed to 58% of the aggregate deal value in the M&A market.

Highlights from Legislative Amendments: Several new regulations have been adopted in 2021, with a particular focus on capital markets. In October 2021, the Capital Markets Board (the "CMB") introduced amendments to the Tender Offer Communiqué No.II-26.1 to clarify some matters with regards to tender offer processes, such as determination of entitled shareholders to benefit from the mandatory offer as well as new exceptions and exemptions from mandatory offer requirement. Most notably amendments have been made to mandatory offer price and principles regarding calculation method and interest rates applicable to the offer price. Accordingly, the CMB has been granted the power to exclude certain periods when calculating the minimum offer price provided that it identifies extraordinary developments that have affected the Turkish economy or the relevant industry during such periods. As such, subject to the discretion of the CMB, average weighted share prices occurring in such periods may be excluded when calculating the minimum offer price.

Later in October 2021, the CMB introduced the new Communiqué on Crowdfunding No. III-35/A.2 (the "Communiqué") abolishing the previous one. Although debt-based crowdfunding was first introduced through amendments to the Capital Markets Law in 2020, details were yet to be addressed. The Communiqué paved the way for the implementation of debt-based crowdfunding by fundraisers and consolidated principles regarding equity-based crowdfunding and debt-based crowdfunding under a single piece of legislation. With the Communiqué, in addition to the existing equity-based crowdfunding, fundraisers now have the opportunity to raise funds through sale of debt instruments. This new financing method is expected to be a viable financing alternative for entrepreneurs as it introduces a different funding method for start-up companies seeking to navigate through relatively strained financial markets and help accelerating realisation of start-up projects.

Finally, in line with the global trend, market participants are expecting an amendment to increase the turnover thresholds for merger filing requirements. As the recent devaluation of the Turkish Lira resulted in relatively low filing thresholds, the Turkish Competition Authority's workload has significantly increased, which is mainly driven by high conversion rates applicable for turnover figures of relevant undertakings in cross-border deals. As such, there is a reasonable expectation in the market that such thresholds may be reviewed considering the current foreign exchange rates.

M&A Market Outlook 2022: It is anticipated that the upward trend in the Turkish M&A market will continue in 2022. A foreseeable exchange rate policy and the economic recovery process will be critical to shape the investment appetite in Turkey. In 2022, we are expecting that the technology, pharmaceuticals/medical, energy, media and communications and industrial manufacturing sectors will be under the spotlight. The implementation of anticipated strategic investments by the Turkish Wealth Fund, tenders for companies transferred to Savings Deposit Insurance Fund (TMSF) along with tenders to be held for assets within the Privatization Administration's portfolio will also be important factors to boost deal volume in 2022.