Turkey: Post-Acquisition Integration Processes In Turkey

Either a minority share or majority share acquisition is planned, due diligence is a market practice whereby acquirers' or its team hires legal/tax/technical consultants in order for the acquirer to negotiate on share price and to protect itself on any matters as to the operation of the company or its implications. Legal team, for instance, goes through all corporate documents of the company and comes up with a legal due diligence report. Although red-flag due diligence can be planned, it requires the team quite a good time to finalize the due diligence report. These due diligence reports may mostly determine the terms of the share purchase agreements and give room for lawyers to negotiate the terms. Although such a post-acquisition process should be determined with experienced lawyers, there are some basics as to post acquisition integration processes. The first five important processes have been summarized below.

1- Determining Board Members and Signatories of the Companies

Upon an acquisition, the removal of the board members, appointment of the new board members and appointment of signatories of the companies are crucial for the company to continue operating without any disruption. The process should be diligently carried out in trade registry where the company is incorporated, and there might be some practical differences within trade registries. After the appointment of the board members, the obligations of the board members and their rights should be determined with a management agreement or an employment agreement where their responsibilities should be clearly set out. Although articles of association of the company and registered/announced appointment documents may help, they can only be drafted in a way Turkish corporate law and regulation enable.

2- Issuance of Internal Directive as to Signatories of the Company and or Power of Attorneys to Company Representatives

It is one of the burdensome parts of the legal team to prepare an internal directive as to signatories of the companies. In companies with multiple branches including banks, insurance companies, retail companies, the signatories should be determined and their rights and their limitations should be set out within the internal directive.

While determining the board members, the internal directive as to their monetary or legal limits of the company representatives, this can be set out through a Power of Attorneys issued by a notary public in Turkey setting out their limits as to company management. It should be noted that since internal directives will be issued and announced, then third parties will be aware of the limitations of the representation authority of the signatories and any act out of the scope of the limitations will not be set out.

3- Updating the Licenses/Permits

Depending on the field of operation of the company, the company may require licenses to operate including but not limited banking, insurance and electronic payment services. Legal team should go over the licenses and permits of the company during the legal due diligence process and should determine whether the area of activity of the company requires any license from regulatory authorities and if the license is fully valid. Certain regulations such as payment service regulation, banking regulation requires companies to have a board of directors complying with the regulation, which should be also carefully examined.

Regardless of whether any regulatory license is required, almost most of the companies with a few exceptions require operating license within the relative mayor and the regulation may require post-acquisition processes such as determining a manager within the company. It should be noted that a Turkish representative (Board Member) is required within the regulation and the company should have a Turkish company representative while applying to the mayor. To circumvent this requirement, virtual offices or shared offices can be preferred since they have existing operating licenses.

4- Notifying the Employees

Turkish Employment Law does not directly impose a post-notification to employees of the companies, however if there are any essential changes that should be applied to the employees, notification and time should be given to the employees of the companies.

Turkish labor law regulations set out rules in favor of the employees and employees are protected within the labor law where the employment agreements and severances should be calculated by the accountants if the acquirer does not wish to keep some of the employees and their process should be diligently handled after the signing of the agreement. Change of the position, decrease in the salary or removing any side benefits of the employees should be diligently carried out within the limitation of the labor law regulations. Otherwise, the company may be subject to indemnification requests that may be equal up to 8-12 months' salary of such employees in addition to their severances, notice and non-served vacation pays.

5- Following Up Pending Litigation Processes

There might be some litigation processes that have been launched against the company or by the company. The risks of the litigation processes should be clearly determined and set out where protective clauses might be integrated into the share purchase agreement in order for the acquirer not to face any additional risks. Beside the process, the company executives should set out a way to handle the litigation procedures and to follow up with the company lawyers.