Effects of Precedents on Proposed Mergers and Acquisitions – Corporate/Commercial Law

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In the case of merger and acquisition transactions (“Transaction”), the signing of an agreement and the completion of the Transaction generally occur at separate times. As such, the parties may bind the Transaction that is planned to be carried out in the future to certain conditions precedent (“PC”) with the deal they will enter into, so they want to ensure that the risks are minimized by taking the Transaction under protection in the meantime until the closing date.


The parties to the transaction can link the achievement of the corresponding closing to the time when the parties fulfill their obligations to each other simultaneously and in full with certain PCs when signing the agreement. PCs can be defined as a contractual condition that must be fulfilled before a right or obligation arises.

In fact, it has been accepted in Turkish law that agreements can be conditional and two different types of conditions have been regulated as delaying and disruptive. Unless otherwise agreed between the parties, agreements with delay conditions will only take effect if the condition is met. The PCs agreed by the parties in the Transactions are also a delaying condition for the completion of the Transaction and if the PCs are not met, the parties may avoid performance or certify the nullity of the agreement relating to the Transaction.

PCs can be provided for both buyer (assignee) and seller (assignor) and there are no PC limitations on which the parties can agree. With the exception of PCs established for the purpose of performing or not performing an act contrary to law or morality, any PC may be freely stated by the parties as a PC. The purpose of the PCs is to ensure that the Transaction is carried out in accordance with the will of the parties and to prevent the execution of the transaction in the event of a situation contrary to the will of the parties. However, in practice, the parties generally draft the said CP for the seller. In this context, significant benefits have been provided on behalf of the purchaser. In particular, the seller will ensure that all the necessary conditions are met to manage in the normal course of business, that no assets are alienated from the target company to be taken over before the date of signature and the date of closing and that no responsibility of the seller will intervene before the purchaser in the event of acquisition of the goodwill.

In this regard, while the CPS are governed by an agreement;

  1. Deadline for completion of CPs
  2. Consequences of not completing CPs
  3. Steps to complete CPs
  4. Determine and determine whether CPs are met

must be determined in detail.

Before deciding on the above PCs, it is recommended that the parties determine the possible risks by carrying out a legal due diligence assessment and decide on the PCs to eliminate or minimize these risks.


PCs are a contractual condition that must be fulfilled before a right or obligation arises. CPs are important contractual instruments that serve as bridges or obstacles to the validity and/or general performance of the agreement. PCs are not only intended for implementation in merger and acquisition deals, but also in a wide variety of contract types such as construction, real estate, and procurement.

Failure to comply with the CP will prevent the completion of the Operation, and at the same time, if a provision in this regard is written in the contract signed in relation to the Operation, it may give rise to the payment of penalty clauses and/or compensation for damages by the liable party.

CPs are not always easy to define and implement. In some cases, a provision may not appear as PC but still make sense in the agreement as PC, or a provision may appear as PC but the PC may not be enforceable. In order to determine whether a provision is a CP or not, the CP must be specified and fulfilled in the content of the agreement entered into in relation to the Transaction. If a CP is not sufficiently detailed, the provision may not be considered a CP -in case of dispute- and non-compliance with PCs may constitute an ordinary offense contractual obligations. In this regard, it is extremely important to draw up detailed and clear PCs specific to the type of Transaction, the parties to the Transaction and the sector for each Transaction.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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