INTRODUCTION
Mergers and acquisitions are not limited solely to the transfer of shares or assets; rather, they frequently involve comprehensive corporate restructurings carried out prior to or in connection with the transaction. Particularly in companies with complex operational structures, various restructuring tools are used to achieve greater predictability and manageability in the contemplated investment or acquisition. One such tool is the hive down structure, which originates largely from Anglo-Saxon legal systems and, although not expressly defined under Turkish law, has in recent years been increasingly preferred as a restructuring tool prior to mergers and acquisitions.
A. THE CONCEPT OF HIVE DOWN
An examination of the origins of the hive down concept reveals that the term has primarily developed within Anglo-Saxon legal practice, particularly in the context of mergers and acquisitions. In international literature, hive down structures are often associated with restructurings aimed at separating specific assets or business lines within a parent company and are generally referred to under the broader concept of a “carve-out.” However, carve-out does not denote a specific legal transaction type; rather, it reflects an economic and commercial objective. The realization of this objective is made possible through legal mechanisms such as partial demergers or hive down transactions. In this respect, the hive down frequently emerges in practice as a restructuring method used to provide a legal framework for carve-out transactions.
Although the concept of hive down has no direct statutory equivalent or express definition under Turkish law, it is commonly encountered in practice in connection with partial demergers and is used to describe restructurings whereby a company transfers a specific business line or a portion of its assets to a newly incorporated or an existing company, which is typically under its control. From this perspective, the hive down constitutes a restructuring technique frequently employed within the framework of mergers and acquisitions.
B. HIVE DOWN AS A PRE-TRANSACTION RESTRUCTURING TOOL IN MERGERS AND ACQUISITIONS
In mergers and acquisitions, hive down structures are often designed as a pre-closing restructuring step. The seller typically transfers the targeted business line to a newly incorporated company, most commonly by way of a demerger, thereby turning such company into the “target company”, and the acquisition is carried out through this new structure. This approach functions as a filtering mechanism, particularly in multi-activity companies, by preventing extensive legal and financial risks from being transferred to the investor. Through this structure, the activities intended for sale are separated from the parent company and transferred to the newly formed target company, while assets and operations not subject to the transaction remain with the seller. In this manner, the scope of the transaction is rendered clear and well-defined, and uncertainties from the buyer’s perspective are significantly reduced. Within the context of mergers and acquisitions, the principal function of a hive down is to clarify the transaction scope and to concentrate the investor’s interest on a specific set of activities or assets. By virtue of this structure, different business lines within the target company are legally and economically segregated, allowing the acquisition to be structured around activities or assets that align with the investor’s strategic objectives. Indeed, risk isolation stands out as one of the most significant advantages offered by hive down structures in mergers and acquisitions. In particular, retaining historical liabilities, ongoing disputes, or regulatory risks within activities that are not intended to be sold is of critical importance for the buyer. Through a partial demerger implemented by way of a hive down, such risks may be kept within the parent company, while only a defined set of assets or a specific business line is transferred to the acquiring entity. This structure is therefore regarded as an element that enhances transaction security for both the buyer and the seller.
In practice, hive down structures are frequently associated with “carve-out” transactions and are commonly preferred in partial share acquisitions or joint venture structures. By contributing to a clearer definition of the transaction scope, this restructuring method plays an important role in reducing post-transaction integration risks for both parties.
Among restructuring models, hive down transactions carried out through partial demergers are regarded as a relatively practical and cost-efficient option for companies. This is because a partial demerger allows restructuring without terminating the legal personality of the company, thereby preserving operational continuity and preventing disruptions to the mergers and acquisitions process.
Pre-transaction hive down implementations also significantly simplify the due diligence process. Rather than examining the entire history and risk profile of the parent company, the buyer’s review is limited to the activities to be acquired. This not only reduces transaction costs but also contributes to a clearer and more predictable allocation of contractual risks.
C. CONCLUSION
In conclusion, the hive down stands out as a functional tool in mergers and acquisitions, enabling the clarification of the investment scope through pre-transaction restructuring, the segregation of risks, and the structuring of transaction architecture in line with the parties’ strategic objectives. Particularly in multi-activity corporate structures, narrowing the transaction scope by separating specific assets or business lines contributes to the creation of a more predictable and manageable acquisition process for both buyers and sellers. Through hive down structures, historical liabilities, ongoing disputes, and regulatory risks may be retained within activities that are not intended to be sold, while the acquisition is structured around assets or activities that align with the investor’s strategic goals. This, in turn, allows for more robust valuation and due diligence processes, reduces post-transaction integration risks, and facilitates a clearer allocation of contractual risks. In this respect, although the hive down is not regulated as a standalone transaction type under Turkish law, it should be regarded as a restructuring method implemented through existing legal mechanisms, primarily partial demergers, and as an increasingly important element of strategic planning in modern mergers and acquisitions practice.
