March 20, 2023

Offshore M&A deal flow calms after record 2015 says Appleby [Cayman Islands remained busiest location]


Following record deal flow in 2015, the number and value of offshore M&A deals fell in the first half of 2016 says offshore law firm Appleby.

The offshore region remains ranked sixth in the world by deal volume for H1 2016, and still ranks fourth for value activity. The latest edition of Offshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the offshore financial centres, notes that while the volume and value of deals involving offshore targets dropped in the first half of this year on a year on year basis, offshore markets continue to record the largest average deal size for any of the world’s regions, at $72m.
“Similar to nearly all other major world regions, deal volume offshore has moved away from last year’s frantic activity and dropped back to levels seen before 2015,” says Cameron Adderley, Partner and Global Head of Corporate at Appleby. “There has certainly been a readjustment, but not one that we feel too downbeat about.”

Uncertainty emanating from the United States presidential elections and fallout from the Brexit vote in Europe, and noted that concerns over the strength of the Chinese economy and the downturn in Latin America may further temper M&A activity globally during the remainder of 2016 says Appleby.

There were 1,406 deals targeting offshore companies in the first half of this year, representing a total value of $101bn. While the number of deals was down 10% when compared to the second half of 2015, the first six months of the year marked the sixth straight half-year period in which the offshore region has recorded more than 1,400 deals.

The first half of the year also saw 10 separate deals each worth in excess of USD2bn, with the biggest deal being the $4.8bn acquisition of China’s CITIC Real Estate and British Virgin Islands-incorporated Tuxiana Corporation by Hong Kong’s China Overseas Land & Investment. The technology and software sectors accounted for six of the top 10 deals of the quarter.

The Cayman Islands remained the busiest location for dealmaking, accounting for one-third of all deals and 40% of total value. Second to Cayman by volume was Hong Kong, with 263 deals, followed by the BVI, with 238. The Isle of Man, meanwhile was the only jurisdiction to experience an increase in deal value.

In terms of deals where the acquirer is based offshore, n the first six months of 2016, there were 1,443 deals recorded worth a cumulative $182bn, for an average of $120m. The report found the amount spent by offshore acquirers is now regularly outpacing the total spend on offshore targets.

“There are clear signs of a trend upwards, with offshore acquisition vehicles being increasingly used for major deals,” says Frances Woo, Hong Kong-based managing partner at Appleby. “Back in 2012, just over 1,000 acquisitions originated from offshore in the first half of the year. That figure has gradually risen over time and is now consistently about 50% higher, with around 1,500 deals typical in a six-month period.”

Financial services and insurance sector was the biggest sector offshore by value as well as volume. In all, 20 subsectors recorded deal value in excess of $1bn. The most popular deal type was capital increases, with 474 deals in the half. The most value went on acquisitions, with $47bn spent in the first half of the year.

Cayman continued to be home to the largest number of deals, although Jersey and the BVI were the only offshore jurisdictions to see more deals in this half than the last. While no large IPOs completed in the first half of the year, says Appleby’s report, there was much more positive news about IPOs when looking at the numbers being announced. With no fewer than 115 potential stock market debuts of offshore companies publicised, the first half of 2016 was among the most active Appleby has reported says the firm.

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