ŞİRKET BİRLEŞMESİ VE DEVRALMA İŞLEMLERİ NASIL YAPILIR?

HOW ARE COMPANY MERGERS AND ACQUISITIONS CARRIED OUT?

What is a Company Merger?

A company merger, in its most basic definition, is the acquisition of one company by another or the combining of multiple companies under the same roof to continue their operations as a single force. In this process, two or more independent companies are united under a single corporate organization. As a result of the merger, the companies' assets, rights, liabilities, and all operational activities are integrated. Depending on the nature of the merger, the independent legal entities of the companies may cease to exist, or one of them may continue its existence.

The most important concept to note here from a legal perspective is the principle of "universal succession". When the merger process is carried out in accordance with the procedures and principles stipulated by law, the acquiring or newly established company takes over all the assets, rights, and liabilities of the acquired company as a whole in a single transaction, without the need for an additional transfer process.

Why Do Companies Merge?

Mergers are not merely simple steps companies take just to grow; they are generally the result of economic necessities and meticulously planned strategic goals. Many brands that wish to survive in increasingly difficult competitive market conditions, make their market position unshakeable, and adapt quickly to changing economic circumstances resort to a merger or acquisition.

We can summarize the reasons for company mergers as follows:

• To increase market share and gain a significant advantage against competitors,
• To accelerate corporatization steps and ensure sustainable growth,
• To reduce production and operational costs and create economies of scale,
• To access brand new markets, regions, and potential customer bases,
• To incorporate critical technologies, sectoral expertise (know-how), or brand awareness,
• To strengthen the financial structure and diversify sectoral risks,
• To benefit from legal incentives and tax advantages provided by the government.

Types of Company Mergers According to Their Legal Structures

In accordance with Article 136 of the Turkish Commercial Code, company mergers are evaluated in two main categories based on their legal structures:

1. Merger by Acquisition (Merger)
2. Merger by Formation of a New Company (Consolidation)

This distinction is highly important in terms of determining which company's legal entity will continue as a result of the transaction.

Merger by Acquisition (Merger)

It is the process where one company acquires another company with all its assets and liabilities and incorporates it into its own structure. According to Article 136 of the TCC, the company that accepts the merger is defined as the "acquiring company", and the company whose legal entity ceases to exist by participating in the merger is defined as the "acquired company".

In this method, the financially stronger company generally purchases a smaller-scale enterprise. While the acquiring company preserves its legal entity and trade name, the acquired company ceases to exist by being deregistered from the trade registry. The shareholders of the acquired company become shareholders in the acquiring company according to the determined exchange ratio. Due to the fast processing and relatively lower costs, it is the most preferred type of merger in the business world.

Merger Through New Establishment (Consolidation)

It is the process where two or more companies completely terminate and transfer all their assets to a brand new company established from scratch. All companies participating in the merger lose their legal personalities, and a brand new legal entity and a different title emerge.

This method is generally preferred in situations where the merging companies are equal to each other in terms of market power and capital, and when it is desired to create a completely new brand image. From a legal and administrative perspective, it is a more complex and longer process compared to an acquisition.

Merger Models According to Strategic Objectives

In addition to the legal infrastructure, companies also follow different strategies based on their sectoral goals when merging. We can gather these under four main headings:

• Horizontal Merger: It is the merger of companies operating in the same sector and doing the same business. The aim is to reduce competition and reach a monopoly/leadership position in the market (e.g., The merger of two different automobile brands).
• Vertical Merger: It is the merger of companies in different links of the supply chain. The aim is to manage the process from the production line to the end consumer single-handedly and to reduce raw material costs (e.g., A textile factory acquiring a cotton-producing agricultural company).
• Conglomerate Mergers: It is the merger of companies in different sectors that have no direct relationship with each other. The main purpose is to diversify investments and distribute risk against economic crises.
• Market and Product Extension Mergers: It is the coming together of companies that produce complementary products but appeal to different customer segments or countries. It is one of the fastest ways to expand into global markets.

Company Merger Conditions: Which Companies Can Merge?

Article 137 of the TCC titled “Valid Mergers” clearly outlines the rules:

• Capital Companies: They can merge among themselves, with cooperatives, and with collective/commandite companies, provided that they are exclusively the acquiring company.
• Personal Companies: They can merge among themselves, as well as with capital companies and cooperatives, provided that they are the acquired company.
• Cooperatives: They can merge among themselves, with capital companies, and with personal companies, provided that they are in the acquiring position.

Step-by-Step Company Merger Process

For the merger process to be valid and to protect the rights of the parties and creditors, it is essential that the process is carried out strictly in accordance with the law.

1. Preparation of the Merger Agreement: It is the constitution of the process. The titles of the companies, exchange ratios, exit funds, and the rights granted to the shareholders are transparently stated in this written agreement and approved in the general assemblies.
2. Company Valuation: The real economic values of the companies are examined by independent experts and financial advisors. The foundation of a fair merger relies on a correctly calculated valuation report.
3. Merger Report and Right of Examination: In order to ensure the transparency of the process, the purpose and financial impacts of the merger are reported. For 30 days prior to the merger, balance sheets, annual reports, and agreements are kept open for the inspection of interested parties.
4. Trade Registry and Registration Procedures: Petitions showing the will to merge, general assembly resolutions, valuation reports, and permit documents obtained from necessary institutions are submitted to the trade registry, and the process is officially completed.

What are the Legal and Financial Consequences of a Company Merger?

Upon completion of the registration process, the legal existence of the acquired company ends; all lawsuits, contracts, and debts are transferred to the new organization. From a financial perspective, because the assets and liabilities of the companies are combined, the balance sheets grow. Especially within the scope of the Corporate Tax Law, when the necessary conditions are met, highly attractive financial advantages such as a "tax-free transfer" may arise for the companies.

Examples of Successful Company Mergers from Turkey

• Koç Holding - Yapı Kredi Bank: It is one of the largest and most successful integrations in the banking sector.
• Kaspi.kz - Hepsiburada (2024): With a volume of 1.1 billion dollars, it is the most recent and massive acquisition example in the e-commerce sector.
• Merger of Public Insurance Companies (2020): The merger of Ziraat, Halk, Vakıf, and Güneş Sigorta under the umbrella of "Türkiye Sigorta" to create a giant domestic structure in the sector is one of the best examples of market expansion and a strategy of joining forces.

Summary Card

• Principle of Universal Succession: As a result of the merger, all assets and liabilities of the acquired company are directly transferred to the acquiring company without the need for any additional procedures.
• Types of Mergers: Based on their legal structures, mergers are divided into two categories: "Acquisition (Merger)" and "New Establishment (Consolidation)" where a completely new brand is created.
• Professional Process Management: For a fair and seamless merger, it is mandatory to accurately conduct the company valuation and fully prepare the merger agreements and reports in accordance with the TCC (Turkish Commercial Code).

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Mesut SENEL | IfasTurk CEO

Independent Accountant Financial Advisor