What is a Merger in Commercial Companies and How is it Done? 

---

💬 Login

You may have heard that companies sometimes decide to merge under one roof to grow, increase their competitiveness, or reduce costs. Just like two individuals getting married, two or more companies can merge a single legal entity .

So how is this merger carried out? What should partners pay attention to? How are shareholder rights protected?

---

⚖️ What does merger mean in commercial companies?

A merger is the at least two commercial companiestheir assets and legal structures under a single company .
As a result of this process:

• A company comes to an end,
• The other one continues or
• They are all liquidated, and a new company is established.

📌 Legal Basis: Turkish Commercial Code Article 136 and subsequent articles

"A merger occurs when all the assets of the acquired company are transferred to the acquiring company and the acquired company is dissolved."

---

🔍 What are the Types of Mating?

1. Merger through Acquisition

• One company acquires another.
• The acquiring company continues, the other company ceases to exist.
• This is the most common type of merger.

Example: Company A Ltd. and Company B Ltd. merge and continue operating under the umbrella of Company A Ltd.

2. Merger through New Incorporation

• All companies cease to exist.
• Partnerships merge to form a new company.
• They generally prefer companies of equal size and based on mutual trust.

Example: Companies C Inc. and D Inc. merge to form a brand new joint-stock company called E Inc.

---

🧱 Which companies might merge?

According to the Turkish Commercial Code, mergers can only occur between commercial companies. However, there are some limitations:

• Capital companiescan acquire both capital companies and sole proprietorships.
• Sole proprietorshipscan only acquire other sole proprietorships.

In short: A limited liability company can acquire a partnership, but a partnership cannot acquire a joint-stock company.

---

📑 What is a Merger Agreement?

The merger process begins with a written merger agreement . This agreement;

• Prepared by governing bodies,
• Presented to partners,
• It is approved by the general assembly.

Mandatory Elements to be Included in the Contract:

• Title of the merging companies
• Form of merger (acquisition / new establishment)
• Exchange rate (e.g., 1 share A = 2 shares B)
• Provisions relating to the protection of rights
• Draft contract for the new company (if there is a new establishment)

---

🧮 Share Exchange Ratio and Shareholder Rights

The partners of the merging companies continue to hold shares in the new structure.
However, their capital may differ during this process. This is where the share exchange ratio comes into play.

For example:

• Company A has a capital of 1 million TL
• If company B has a capital of 2 million TL, then
  the shareholders of company B will receive a larger share.

Shareholder Protection:

• A capital increase can be made
• The balance can be achieved with a cash payment (balancing payment)
• Transparent information is essential

---

📚 The Legal Process of the Merger, Step by Step

1. The decision of the governing bodies to merge

2. Preparation of the merger agreement

3. Obtaining audit reports

If the company is subject to independent auditing, an expert report will be obtained regarding the merger transaction.

4. General Assembly Approval

The merger decision is voted on at the general meetings of both companies. A 75% majority required.

5. Registration and publication in the commercial registry

As soon as the decision is made, it is reported to the registry and announced.

6. Termination of the acquired company

After registration, the transferred company is dissolved and its legal personality ceases.

---

🔄 Financial and Tax Implications of the Merger

The merger is not only a legal transformation but also a financial one.

✔️ Advantages:

• Tax exemption may be granted (Corporate Tax Law, Articles 19-20)
• Profits and losses can be combined
• Debts are consolidated under one roof
• Corporate power increases

⚠️ Risks:

• Hidden debts can be transferred
• Brand value may be damaged
• Disagreements may arise between the partners

---

🧠 Frequently Asked Questions (FAQ)

❓ Does every merger have to be reported to the competition authority?

Company mergers exceeding a certain turnover threshold to the Competition Authority . Otherwise, administrative fines may be imposed.

❓ What can a partner who objects to the merger do?

If a shareholder does not wish to participate in the merger, the right to withdraw from the company or request the purchase of their rights .

❓ What happens to a brand and trade name after a merger?

The acquiring company retains its original name. Other names are transferred to the acquiring company, but their use may be restricted.

---

✅ Conclusion: A Strategic Merger for Growth

In commercial companies, mergers, when properly planned, can be a springboard for businesses. However, every merger is also a process of separation, cultural change , and integration .

Therefore, when merger decisions are made:

• Financial statements should be carefully examined
• Partners should be informed in a transparent manner
• Legal proceedings should be handled by experts.

Gozdenur Turna