Ⅰ. Introduction
In the corporate world, mergers and acquisitions are strategic moves frequently pursued by companies aiming for growth, market entry, and competitive advantage. However, non-friendly forms of such transactions—namely hostile takeovers—pose far more complex and risky processes for companies. A hostile takeover refers to an attempt to gain control of a target company without the consent of its board of directors, often by directly approaching the shareholders. This article will examine the methods of hostile takeovers, the associated defense strategies, and—although not explicitly defined under Turkish law—their forms and application within the Turkish legal and strategic context.
ⅠⅠ. Hostile Takeover Processes and Key Methods
Hostile takeovers are typically carried out in publicly held companies through the direct acquisition of shares from the market or from existing shareholders. The most commonly employed methods in this process are as follows:
Tender Offer: The acquirer makes an offer to the shareholders of the target company to purchase their shares at a price above the current market value. The objective is to gain control by acquiring a majority of the shares.
Proxy Fight: The acquirer seeks to gather shareholder votes in order to replace the existing board of directors of the target company. Once control of the board is secured, it becomes possible to facilitate the takeover.
Each of these methods is inherently aggressive, as they are designed to achieve control despite opposition from the target company's board of directors. Since these tactics are generally applied in the context of publicly traded companies, there is no requirement for board approval for the transfer of shares.
ⅠⅠⅠ. Defense Mechanisms of Target Companies
Target companies have developed a variety of legal and structural defense strategies to counter hostile takeover attempts. These strategies aim to prolong the process, increase the cost, and ultimately deter the acquirer's interest. The table below provides a summary of commonly used defense mechanisms:
| Defense Mechanism | Description | Effect | ||
|---|---|---|---|---|
| Poison Pill | Grants existing shareholders the right to purchase new shares at a discount, diluting the acquirer's stake. | Increases the cost of acquisition; creates a deterrent effect. | ||
| Golden Parachute | Provides for substantial severance payments to key executives following a takeover. | Makes the acquisition process more expensive. | ||
| Crown Jewel | The company disposes of or restructures its most valuable assets. | Reduces the attractiveness of the company. | ||
| Greenmail |
|
Allows the acquirer to exit with a short-term gain, ending the process. | ||
| Buyback | The company repurchases its own shares from the market, limiting the acquirer's room for acquisition. | May reduce liquidity, but strengthens market control. | ||
| White Night (Alternative Buyer Search) | A friendly third-party buyer is introduced to create competitive tension. | Weakens the likelihood of a hostile takeover. |
The applicability of these defense mechanisms may vary depending on the company's capital structure, shareholder relations, and governing legal agreements.
Ⅳ. Regulatory Framework and International Practices
In jurisdictions where hostile takeovers are more prevalent—such as the United States, the United Kingdom, and Germany—regulatory frameworks have imposed specific rules on such transactions. In the United States, the Williams Act of 1968 introduced disclosure and transparency requirements for tender offers. In the United Kingdom, the Takeover Code, administered by the City Takeover Panel, contains essential provisions regulating both the timing and the method of takeover processes.
These regulations are designed to safeguard the rights of both target companies and investors, while also preserving the stability of the market and investment climate.
Ⅴ. Hostile Takeovers in Türkiye: Legal and Practical Assessment
In Türkiye, the relatively limited occurrence of hostile takeovers can largely be attributed to the prevailing family-controlled governance structures of many companies. Even among publicly held joint stock companies, controlling shareholders with significant voting rights often form a strong resistance mechanism against unsolicited takeover attempts. This dynamic makes it particularly difficult for foreign investors or strategic funds to obtain direct control, frequently leading to the failure of hostile strategies.
Moreover, in non-public companies, the legal requirement for board approval and the registration of share transfers in the share ledger further restricts the feasibility of hostile takeovers.
Additionally, specific provisions embedded in the articles of association—such as voting privileges, board election structures, and share transfer restrictions—are also considered effective tools in deterring hostile acquisition attempts. However, these provisions must be carefully crafted to ensure compliance with principles of fair competition and shareholder rights, and must remain aligned with market regulatory standards.
On the other hand, recent years have seen an increase in takeover potential in companies that exhibit high levels of public float, advanced corporate governance structures, yet fragmented shareholding. In such companies, foreign-based investment funds have increasingly sought influence by acquiring shares through the stock exchange, employing strategies that may indirectly lead to structures resembling a "control contest" in the Turkish capital markets.
Ⅵ. Capital Markets Board Regulations ("Board") and Mandatory Tender Offer
In Türkiye, a mandatory tender offer obligation is imposed in cases of change of control in publicly held companies, with the aim of protecting investors and ensuring market integrity. This obligation is primarily regulated under Article 26 of the Capital Markets Law No. 6362 ("CML") and the Communiqué on Tender Offers No. II-26.1 ("Communiqué").
According to Article 26 of the CML, if an individual or a group acquires direct or indirect control of a company, they are required to make a tender offer to the remaining shareholders.
In this context, Article 12 of the Communiqué defines "control" as follows:
"Acquiring, directly or indirectly, alone or jointly with persons acting in concert, more than 50% of the voting rights of the company shall be deemed as acquisition of control."
Articles 11 and 13 of the Communiqué regulate the procedural steps following such acquisition of control. Accordingly, the person(s) acquiring control must apply to the Board within six business days of the public disclosure of such acquisition, and initiate the actual tender offer within two months at the latest. Failure to comply may result in administrative fines and suspension of voting rights.
The tender offer price is determined based on the weighted average market price of the shares over the past six months and the highest price paid for the shares before the offer. This pricing methodology aims to ensure the principles of fairness and transparency for investor protection.
These regulations help safeguard minority shareholders during hostile takeover processes and ensure transactional security. At the same time, the tender obligation limits the acquirer's bargaining power and helps balance the speculative nature of such transactions.
Ⅶ. Impact of Hostile Takeovers on Corporate Culture
Hostile takeovers can affect not only the capital structure but also the internal culture, employee engagement, and managerial stability of a company. In particular, the dismissal of existing management or the abrupt alteration of strategic decision-making processes may create uncertainty among employees, negatively impacting productivity, motivation, and commitment to corporate values.
If the acquirer adopts a cost-centric restructuring approach, this may undermine the sense of job security and cause long-term damage to the company's brand value. Therefore, defense strategies against hostile takeovers should not focus solely on financial metrics, but must also take into account the sustainability of corporate culture.
Ⅷ. Strategic Protection Through Corporate Governance Principles
One of the most effective protective mechanisms against hostile takeovers in Türkiye is the structural measures introduced by the Corporate Governance Communiqué. The presence of independent board members, strengthened representation rights of minority shareholders, and the principle of public disclosure establish important checks and balances in the takeover process.
The implementation of these principles enhances not only the company's defenses against takeovers but also investor confidence and market value.
Ⅸ. Conclusion and Assessment
A hostile takeover is a strategic process aimed at acquiring control of a target company without the consent of its management. This process is shaped by aggressive financial maneuvers, legal frameworks, corporate defenses, and market dynamics. Defense mechanisms play a crucial role as protective tools for target companies; however, each also carries its own financial and reputational costs.
Although hostile takeovers remain relatively rare in Türkiye, growing regulatory sophistication and the evolving profile of institutional investors are fostering increased awareness and preparedness for such strategies. Therefore, it is of great importance for companies—particularly publicly held joint stock companies—to establish early warning systems, review their articles of association, and implement corporate governance principles.
For both investors and corporate management, long-term success lies not only in resisting takeovers but also in building the capacity to manage such risks effectively.
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.
