Analyzing the IPO Transition of Türkiye’s Defense Firms: Challenges and Opportunities

In response to Türkiye’s tightened monetary policy and the increase in interest rates to 45% as of January 2024, private companies could consider primary Initial Public Offerings (IPO) and alternative financing methods such as direct listings, mergers, and foreign direct investments as strategies to manage rising borrowing costs.

Amid geopolitical tensions, notably stemming from Russia’s invasion of Ukraine, and the consequent surge in demand for military equipment, defense industry companies in Türkiye could focus on enhancing their production capabilities and tapping into international markets via IPO funding. This approach presents a strategic opportunity to meet the growing global defense requirements.

With Türkiye’s defense sector securing contracts valued at USD 10.24 billion and global defense spending increasing to $2.2 trillion with the influence of geopolitical tensions, enhancing production capabilities is essential for Türkiye to secure more NATO-related defense contracts and expand its international cooperation or partnerships with other defense sector players, solidifying its position in the global defense market.

A Turkish defense industry company planning for an IPO, must consult legal experts versed in Türkiye's Capital Markets Legislation and ensure the stringent protection of confidential and classified data. Employing strong NDAs and legal advice is crucial for aligning with national security protocols and safeguarding intellectual property during their public market debut.


The IPO process marks a significant transition for companies within Türkiye’s defense industry, shifting from private to public status to tap into wider capital markets and enhance market visibility. This strategic endeavor is driven by multiple financial incentives, including the desire to diversify ownership, secure equity funding without increasing debt, and leverage opportunities for growth and acquisitions. In the same vein, the backdrop of Türkiye’s monetary policy, characterized by a notable shift towards higher interest rates to combat inflation, has influenced the trend towards IPOs as an alternative financing route. In 2023, there was a marked escalation in Initial Public Offering (IPO) activities, with a notable number of defense companies achieving successful listings on the Borsa Istanbul (BIST). This phenomenon significantly contributed to the fortification of the national economy and facilitated the broadening of the defense sector’s scope. The pivotal role of legal expertise cannot be overstated in this context, particularly with an emphasis on maintaining confidentiality and adept handling of classified information, which are of paramount importance in the defense industry. Safeguarding intellectual property rights and adhering to regulations on classified information exchange are critical, emphasizing meticulous planning and compliance management.

The IPO Process: Transforming a Company from Private to Publicly Listed Company

metin, yazı tipi, ekran görüntüsü, daire içeren bir resimAçıklama otomatik olarak oluşturuldu





‘‘As an outcome of transitioning into a public entity, the company is obligated to perpetually furnish the public with specific disclosures.’’

An IPO represents a pivotal mechanism through which a company can mobilize capital by facilitating the listing of its shares on a public exchange. Within the framework of an IPO, a private entity generates new shares with the support of underwriting firms and subsequently offers them for sale to the individual or institutional investors. It is crucial to emphasize that the process primarily entails a company offering its shares for sale to the public on a stock exchange for the first time, as demonstrated by the practices of companies through the BIST in Türkiye. This transition effectively alters the company’s organizational structure, transitioning it from a privately held entity to a publicly listed corporation. As an outcome of transitioning into a public entity, the company is obligated to perpetually furnish the public with specific disclosures, including its financial statements on both a quarterly and annual basis. This transformation results in significant changes across various aspects of the company, ranging from corporate governance practices, financial transparency requirements to confidentiality matters, which are particularly important for companies active in strategic sectors such as the defense industry or energy sector, directly affecting a country’s institutional capacity.

Financial Incentives Behind IPO Decisions

metin, ekran görüntüsü, yazı tipi, tasarım içeren bir resimAçıklama otomatik olarak oluşturuldu

Source: PricewaterhouseCoopers, Global IPO Watch 2023 Report

‘‘The most prevalent incentive for embarking on an IPO is the pursuit of equity funding.’’

A private corporation could possess a variety of distinct motivations for selecting the IPO method as its preferred route to capital mobilization and corporate evolution. Among these motivations, the enhancement of its public profile stands prominent, aiming to elevate its visibility and stature within the broader market and industry sector. Concurrently, the execution of an IPO allows for the establishment of a broad shareholder base, diversifying its ownership structure across a wider spectrum of investors. The most prevalent incentive for embarking on an IPO, however, is the pursuit of equity funding. This approach to capital acquisition is especially advantageous, as it enables the company to amass substantial financial resources without resorting to debt, thus facilitating expansion and operational scaling while potentially diluting existing ownership stakes. At the same time, a publicly listed company may leverage the opportunity to augment its resources through foreign direct investments, more accessible bank financing, and engaging in discussions regarding mergers and acquisitions.

Central Bank of the Republic of Türkiye’s Monetary Policy and Its Impact on IPO Trends in Türkiye

çizgi, diyagram, metin, öykü gelişim çizgisi; kumpas; grafiğini çıkarma içeren bir resimAçıklama otomatik olarak oluşturuldu

‘‘A steady rise in interest rates is anticipated, leading to an increase in the cost of bank loans.’’

The monetary policy enacted by a country can significantly influence private companies’ inclination towards utilizing IPO methods, particularly when interest rates are adjusted as a measure of monetary tightening. In this context, the monetary policy of Türkiye underwent a notable shift towards alignment with orthodox economic principles, embracing the necessities dictated by neoliberal market dynamics subsequent to the general election held in May 2023. This strategic adjustment manifested in a marked increase in interest rates, escalating from 8.5% to 45%. Such a pronounced elevation in rates reflects a determined approach to combat hyperinflation within the Turkish economy, signifying a radical departure from prior unorthodox monetary strategies. The government has fully endorsed the medium-term economic program, that has announced a shift towards tight monetary policy aimed at combating inflation over the next three years. This strategy intends to curb societal consumption and foster a nationwide disinflationary environment until 2026 as a medium target. As part of this approach, a steady rise in interest rates is anticipated, leading to an increase in the cost of bank loans. This scenario will pose challenges for companies seeking credit from Turkish financial institutions, prompting them to explore alternative financing options, such as mergers and acquisitions, foreign direct investments, or raising capital through an IPO or direct listing on the BIST. Ideally, a negative correlation exists between monetary tightening policies and IPOs, M&As, or FDIs as economic activity begins to slow down. However, the nature of military defense industry contracts and their market structure, which are significantly influenced by state policies or international funds, continues to render the industry a reliable sector for engaging in public listing processes.

Türkiye’s IPO Surge in Response to Monetary Tightening

metin, ekran görüntüsü, diyagram, öykü gelişim çizgisi; kumpas; grafiğini çıkarma içeren bir resimAçıklama otomatik olarak oluşturuldu

Source: E&Y Global IPO Trends 2023 Report (Data for Turkey is marked by the author.)

‘‘In 2023, the CMBT reported that 54 companies went public, raising around 79.3 billion liras (about $3.34 billion USD) from the market.’’

A discernible consequence of adopting stringent monetary policies for private entities has been a pronounced shift towards IPOs in 2023, a maneuver that significantly enhanced their capital procurement from the capital markets. The Capital Markets Board of Türkiye (CMBT) documented that, within the year 2023, a total of 54 companies transitioned to public ownership, successfully garnering approximately 79.3 billion liras (equivalent to an average of 3.34 billion USD) from the market. The projection that Türkiye will persist in its enforcement of tight monetary policies as a measure to mitigate escalating inflation rates until 2026 suggests a continuation of this trend specifically for the defense industry of Türkiye. As reported by the CMBT, BIST has attained a notable position on the global stage, securing the 11th rank in relation to the number of public offerings and the 10th rank concerning the size of these offerings. Commencing from the year 2020, there has been an addition of 145 companies to the exchange, each initiating the trading of their shares on this platform. At least for the next 3 years, the current/future fiscal and monetary policies in effect are anticipated to temper economic activity and restrict the ability of companies to obtain significant credit from both public and private banking institutions. This expectation is based on the actions and statements of relevant decision-makers.

Turkish Defense Industry's Strategic Expansion and Global Impact

The current rigorous macroeconomic policies, in tandem with the substantial progress within Türkiye’s defense sector, have generated optimal market conditions for defense-oriented companies aiming to augment their production capabilities. At the same time, the escalation of geopolitical risks and tensions arising from ongoing conflicts in the Middle East and Europe has compelled states to enhance their military industrial capabilities and investments.

metin, ekran görüntüsü, yazı tipi, sayı, numara içeren bir resimAçıklama otomatik olarak oluşturuldu

Source: US Department of Defense 2024 Discretionary Budget

çizgi, diyagram, öykü gelişim çizgisi; kumpas; grafiğini çıkarma, metin içeren bir resimAçıklama otomatik olarak oluşturuldu

 Source: Macro Trends: Turkey Military Spending/Defense Budget 2002 - 2022

‘‘The slowdown in European defense production is expected to shift key future defense contracts, especially for military support to Ukraine, to the Turkish defense industry.’’

The augmentation of the defense budget by the United States Department of Defense signifies a considerable escalation in investments over the next four years, indicating that additional military defense contracts will become accessible to international players. This development is a result of the Pentagon’s model for military defense industry contracts. According to expert sources, the observed sluggishness in the production cycles of European defense factories is expected to lead to the redirection of some crucial future defense contracts to the Turkish defense industry, particularly for military equipment support for Ukraine. In support of that NATO Secretary General Jens Stoltenberg underscored the necessity to transition from the moderate pace of production characteristic of peacetime to the accelerated production rate demanded by the conflict, with the objective of replenishing supplies and continuing support for Ukraine. In accordance with that according to the Defense Industry Agency of Türkiye (DIA), the country’s defense and aerospace sector is actively exporting to over 180 countries worldwide. The sector currently employs more than 80,000 individuals and the Agency further emphasizes that Türkiye’s growing achievements in the defense industry have resulted in the gradual lifting of various embargoes. Besides, the defense industry’s contribution to Türkiye's total exports has risen to 2.2%. The signing of contracts totaling USD 10.24 billion demonstrates Türkiye's military industry’s capability to expand its presence as geopolitical tensions rise.

ekran görüntüsü, öykü gelişim çizgisi; kumpas; grafiğini çıkarma, diyagram, çizgi içeren bir resimAçıklama otomatik olarak oluşturuldu

Source: Stockholm International Peace Research Institute (SIPRI) - Arms exports of Türkiye (2002 – 2022)

‘‘At the global level, The IISS has reported that defense expenditure surged by 9%, reaching an unprecedented $2.2 trillion last year.’’

In light of the evaluation of international engagements and collaborations of future defense contracts with the Western institutions, it has been formally declared that a Directorate within NATO will be constituted with the primary focus on initiating novel financing models for defense exports under the Türkiye’s DIA. This initiative will also concentrate on targeted efforts regarding NATO member states and their procurement processes. It is emphasized that this newly established unit will work in close coordination with the Ministry of Treasury and Finance to formulate financial policies aimed at bolstering defense corporations. At the global level, The International Institute for Strategic Studies (IISS) has reported that defense expenditure surged by 9%, reaching an unprecedented $2.2 trillion last year. IISS anticipates a further increase in defense spending in 2024, driven by Israel’s conflict with Gaza, the ongoing situation in Ukraine, and escalating tensions in the Indo-Pacific region.

Many Key Defense Sector Players Listed on BIST and Future Opportunities of Private Defense Companies

‘‘TAF have significantly expanded their domestic production of military equipment and subsystems, aiming to maintain operational continuity and reduce the impact of possible international sanctions in cross-border operations.’’

The potential redirection of Ukraine-related defense contracts to Türkiye can be attributed to the industry's vast experience and faster delivery times, which are a result of Türkiye’s extensive counter-terrorism efforts and ongoing cross-border operations. At the same time, it is essential to underscore that the TAF have substantially increased their domestic capacity for military equipment and subsystems. This strategic development is intended to ensure operational continuity and mitigate the potential effects of international sanctions during cross-border engagements. Such an environment has promoted the establishment of collaborative efforts in joint research and development projects, as well as the formulation of cooperative marketing strategies with international defense counterparts through the mechanism of IPOs. A number of corporations listed on the BIST are recognized as leading manufacturers or suppliers in the defense industry. These include Aselsan Elektronik Sanayi ve Ticaret A.Ş. (ASELS), Forte Bilgi İletişim Teknolojileri ve Savunma Sanayi A.Ş. (FORTE), Karel Elektronik Sanayi ve Ticaret A.Ş. (KAREL), Katmerciler Araç Üstü Ekipman Sanayi ve Ticaret A.Ş. (KATMR), Otokar Otomotiv ve Savunma Sanayi A.Ş. (OTKAR), Papilon Savunma Teknoloji ve Ticaret A.Ş. (PAPIL), and SDT Uzay ve Savunma Teknolojileri A.Ş. (SDTTR). These entities are crucial in advancing the defense industry, providing an extensive portfolio of products and technologies that enhance the strategic capabilities of this vital sector, and in turn, bolster the nation's defense infrastructure. Furthermore, Altınay Defense, a private company within the defense sector, has announced its plans to proceed with an IPO. While the specific timing of the public offering remains undisclosed, the proceeds from this IPO are designated for the development of new facilities and the penetration of new international markets.

Stakeholders in the IPO Preparation Process: Roles and Responsibilities

In the execution of an IPO, a diverse group of professionals assumes critical roles, orchestrating the company’s transition from a private to a public entity. This process involves a spectrum of decision-makers and advisors, encompassing internal company executives, external consultants, and regulatory bodies. The senior management team of the company, which initiates and oversees the IPO process, is central to this transition. Legal advisors ensure compliance with the complex legal framework governing public offerings, while auditors and accountants verify the financial health and transparency of the company’s disclosures. Additionally, investment bankers and sales teams are instrumental in structuring the offering, determining its price, and marketing it to potential investors. Collectively, these professionals constitute an integral network, each contributing their specialized expertise towards the fruition of a successful public offering.





Senior Management Team of the Company

Charting the strategic course for the IPO, ensuring alignment with corporate objectives.

Central to initiating and overseeing the IPO process.

Auditors and Accountants

Affirming the integrity and precision of financial disclosures.

Crucial for meeting regulatory standards and fostering investor confidence.

Investment Bankers

Advising on IPO structure, pricing strategies, and timing; often underwriting shares.

Serve as the linchpin in the IPO process, mitigating market risks.

Legal Advisors

Navigating securities legislation, preparing the The Capital Markets Board of Türkiye compliance and other legal documents including Intellectual Property Rights and Confidentiality Matters etc.

Indispensable for ensuring regulatory compliance.

Equity Research Analysts

Engaging with institutional investors to gauge interest and market receptivity.

Essential in the preliminary phases for assessing investor interest.

Sales Teams

Strategically distributing the IPO to prospective investors.

Tasked with the effective marketing of the IPO.

Legal Expertise in the IPO Preparation Process

‘‘Throughout the pre-IPO phase, legal advisors collaborate with companies to develop comprehensive strategies for IPO readiness and the resilience of the new public entity in the legal environment.’’

In the IPO process, lawyers play a crucial role in ensuring regulatory compliance and facilitating a smooth transition to public status. Their responsibilities begin with thorough due diligence to assess the company’s legal standing and potential risks. They then proceed to draft and review essential IPO documents, including the prospectus, ensuring accuracy and adherence to legal standards amendment by Türkiye’s Capital Markets Legislation. Under the regulations of the Capital Markets Law and the Communiqué on Shares (VII-128.1), the privilege of going public and listing shares on BIST, is exclusively reserved for joint stock companies including foreign companies based in Türkiye. For a company to qualify for listing on BIST, it must have been established for no less than two years before applying for inclusion. Alongside the Capital Markets Board (CMB), key regulatory and enforcement authorities for IPOs include BIST, the Central Securities Depository (CSD), and the Istanbul Settlement and Custody Bank (Takasbank). These institutions play crucial roles in establishing and enforcing the rules governing IPOs. Therefore, legal advisors play a pivotal role in guiding the structuring of securities and overseeing the management of critical information disclosure to investors, which is especially crucial in safeguarding intellectual property rights and confidential contracts within the defense sector. Plus, law firms prepare defenses against potential legal challenges and advise on post-IPO legal obligations. Throughout the pre-IPO phase, they work with companies to develop comprehensive strategies for IPO readiness, underscoring the indispensable role of legal expertise in the IPO process.

Theoretical Background of the IPO Process


Action by Law Firms


1. Legal Due Diligence

Conduct comprehensive examination of the company.

To understand operations, evaluate risks, and assess legal standing.

2. Drafting IPO Documents

Create prospectus and other necessary regulatory documents.

To ensure completeness, accuracy, and compliance with regulations.

3. Reviewing Compliance

Verify adherence to legal frameworks and regulations.

To safeguard against liabilities and ensure regulatory compliance.

4. Securities Structuring Advice

Provide guidance on structuring the company’s securities.

To meet regulatory requirements and market expectations.

5. Disclosure of Information

Assist in disclosing necessary information to investors.

To ensure transparency and regulatory compliance in disclosures.

6. Navigating Cross-border Legal Issues

Address legal and regulatory conflicts, including double taxation.

To manage legal complexities in multiple jurisdictions.

7. Prospectus Liability and Due Diligence Defense

Prepare defenses against legal challenges.

To protect the company and its management from liability issues.

8. Advising on Post-IPO Legal Responsibilities

Guide on new legal obligations post-IPO.

To ensure ongoing compliance with securities laws and regulations.

9. IPO Readiness Planning

Work with companies to develop plans for IPO readiness.

To prepare companies thoroughly for the public offering process.

 Crucial Legislation for the Turkish Legal Framework of the IPO Process

Legislative Documents


Capital Markets Law

The foundational statute regulating the framework of the Capital Markets Board in the realm of capital market activities.

Communiqué on Shares (VII-128.1)

Sets down the procedures and principles for the issuance of shares and quasi-shares, according to the provisions of the Capital Markets Law no. 6362 dated 6/12/2012.

Communiqué on Prospectus and Issuance Document (II-5.1)

Outlines principles for the preparation, approval, and promulgation of prospectus and issue documents, as well as for advertisements and announcements related to them, pursuant to the Law no. 6362 dated 6/12/2012.

Communiqué on Sales of Capital Market Instruments (II-5.2)

Defines the principles regarding the sales method, distribution, and delivery of capital market instruments.

Communiqué on Material Events (II-15.2)

Establishes procedures and principles for the public disclosure of information, events, and developments that may affect the value or price of capital market instruments or investor decisions.

Communiqué on Corporate Governance (II-17.1)

Determines corporate governance principles and the principles and procedures on related party transactions that shall be applied by corporations.

Listing Directive of BIST

This directive outlines the requirements and procedures for companies seeking to list their securities on BIST, ensuring compliance with market standards and regulations.

Relevant directives, general letters, and announcements of Takasbank and the CSD

These documents include additional regulatory guidelines, procedural details, and updates issued by Takasbank and the CSD that affect market operations, securities transactions, and settlement processes.

Critical Stage for Defense Companies in the IPO Process: Managing Confidentiality and Classified Information in Government-to-Government (G2G) and Government-to-Business (G2B) Contracts

‘‘The confidentiality agreements for defense firms are indispensable, as it guarantees that sensitive information, which could potentially compromise national security, is protected from unauthorized access.’’

For a defense industry company embarking on the path to public offering through an IPO, the management of confidentiality and classified information entails distinct challenges. In this vein, the nature of the military defense industry, characterized by its prioritization of confidentiality in both G2G and G2B contracts, plays a pivotal role not only in facilitating business engagements but also in the classification of public information crucial for the protection of national security. This emphasis on confidentiality is indispensable, as it ensures that sensitive information, which could potentially compromise a nation’s security, remains safeguarded from unauthorized access. The stringent management of such information underpins the strategic operations of defense sectors, reinforcing the integrity and security of national defense mechanisms.

Within this context, the company’s existing and forthcoming confidential agreements with secondary and tertiary parties become crucial under the framework of a Non-Disclosure Agreement (NDA). NDA is critical in safeguarding a secure environment that guarantees the confidentiality of sensitive information acquired in the course of the IPO, preventing its unauthorized disclosure. The agreements underscore the importance of the confidentiality principle, which involves a sophisticated system for classifying information into categories like top secret, confidential, privileged, and service specific depending on their implications or potential influence for the national security of countries. This complexity necessitates the indispensable role of legal advisors both before and during the company’s public offering processes. Assessing each agreement of the company individually is essential to maintaining compliance with contractual obligations and safeguarding against legal infractions.  For example, The Need to Know Principle, limiting classified information access to individuals with security clearance from the Ministry of National Defense under current policy environment Türkiye and many other Western policy systems, highlights the increased responsibility in handling such data.

Given the wide range of classified information, from cryptographic and nuclear specifics to technological resources like software and hardware, stringent legal and security measures are imperative for a company aspiring to go public. Another critical consideration for defense companies intending to go public concerns intellectual property rights, which are often inadequately addressed or overlooked in contractual clauses related to intellectual and proprietary rights. The protection of a company’s intellectual property rights throughout the IPO process holds utmost significance which directly influence the direct/indirect incomes of the companies. In this process it is highly recommended that, consistent liaison with law firms is vital for addressing ad-hoc situations that may arise from the company’s operational or implementation processes. The complexity is further augmented by the stipulations for distributing or exchanging classified information under specific conditions, such as through international contracts, domestic legal frameworks, or NATO project agreements. These considerations demand a detailed approach to compliance and risk management, presenting a unique set of challenges for defense companies transitioning to the public market.

Key Confidentiality Terms in Military Defense Contracts


G2G & G2B Contracts



G2G contracts are agreements between two government entities for the sale, exchange, or transfer of defense-related equipment, technology, or services. G2B contracts are agreements between a government entity and a private or public company for the procurement of defense equipment, technology, and services.

Non-Disclosure Agreement (NDA)

An NDA is a legally enforceable contract creating a confidential bond between the parties, ensuring that any sensitive information shared will not be disclosed to unauthorized individuals.


This pertains to the categorization and identification of information, documents, and materials that should not be publicly disclosed due to national security concerns, classified as top secret, confidential, privileged or service specific.

Classified Information

This term encompasses legally protected documents and materials, including those related to cryptography and nuclear matters, covering a wide range of confidentiality levels and forms of communication, as well as various physical and technological assets.

Need to Know Principle

Within the context of defense programs, this principle, often found in NDAs, applies distinctly and refers to individuals with a security clearance from the Ministry of National Defense or other relevant institutions in different jurisdictions, granting them exclusive rights and responsibilities to access and utilize classified data.

Special Allowance for Classified Exchanges

The dissemination or transfer of classified information, whether related to defense projects or materials, to foreign entities or individuals is restricted to specific conditions such as adherence to international contractual obligations, domestic legal regulations, or terms set forth in special NATO projects.


The interplay between Türkiye’s stringent monetary policies, epitomized by the escalation of interest rates to 45% as of January 2024, and the prevailing geopolitical tensions arising from Russia’s invasion of Ukraine, presents opportunities for the Türkiye’s defense industry. It is imperative for entities within this sector to explore IPOs alongside alternative financial mechanisms such as direct listings, mergers, and foreign direct investments as strategic responses to the challenges posed by increasing borrowing costs. Leveraging IPO funding is important for defense companies seeking to augment their production capabilities and penetrate international markets, in response to the surging global demand for military equipment. This strategic endeavor necessitates a rigorous adherence to regulatory compliance, intellectual property protection, and the management of confidential and classified information of the companies particularly for the defense sector as well as highlighting the critical role of legal consultation with experts versed in Türkiye’s Capital Markets Legislation. By employing robust NDAs and seeking legal guidance to ensure alignment with national security protocols and safeguard intellectual property rights, defense industry firms can effectively navigate their transition to the public market, capitalizing on the unique economic and geopolitical dynamics currently at play.

Legal and Financial Disclaimer

The information provided in this document is for informational purposes only and is not intended to serve as legal, financial, or investment advice. For more information reach us on:

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