The Cayman Islands recorded more M&A transactions than any other offshore jurisdiction in the first half of 2018, while also seeing the total value of its deals increase by nearly 50% over the second half of 2017, according to a report released today by offshore law firm Appleby
The latest edition of Offshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the major offshore financial centres, focuses on transactions announced over the first half of 2018. Following a similar pattern to most of the world’s regions, the volume of offshore deals has fallen back from levels seen in the latter half of 2017, while value is on the rise.
“It is good to see Cayman remain the busiest offshore jurisdiction for dealmaking to start off the year,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “Despite a dip in the number of local deals when compared to the second half of 2017, Cayman experienced a significant rise in deal value and was home to four of the 10 largest deals of 2018 thus far.”
Cayman Remains Busiest Jurisdiction for Dealmaking, Fuels Robust IPO Market
Cayman-incorporated companies were the target of 421 transactions worth a combined USD60.9bn in the first half of 2018, representing 31% of all offshore deals and 28% of total offshore deal value during that time. Transactions were down 9% from the second half of 2017, while deal value was up 49%.
The sharp increase in deal value was fueled in part by the jurisdiction playing home to four of the 10 biggest offshore deals of the first half of 2018. These included a USD9.8bn minority stake sale of Tencent Holdings Ltd. by Naspers Ltd, a separate USD9.36bn minority stake sale of Tencent Holdings by JP Morgan, a USD4.58bn capital increase by Softbank Group Corporation in Xiaoju Kuaizhi Inc. and a USD2.3bn capital increase by China Evergrande Group.
Last year saw new highs for offshore IPOs and that momentum has continued into 2018, with 180 companies announcing their intention to go public in the first half of the year. Offshore IPOs typically occur on U.S., London or Hong Kong stock exchanges, with Hong Kong being an especially popular choice for the Cayman Islands, the busiest jurisdiction for IPOs. Additionally, 71 of the 80 IPOs completed in the first half of 2018 involved Cayman companies.
The M&A Environment Across Jurisdictions
In total, there were 1,344 deals recorded in the first half of 2018, representing a 10% decrease when compared to the last six months of 2017. The total deal value of USD216bn, meanwhile, marked a 68% increase over the second half of 2017 and was driven in part by the USD62bn acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical. Each of the offshore region’s 10 biggest deals was worth more than USD2bn.
The most frequent types of deals were acquisitions, capital increases and minority stakes in other companies. Typically, these three categories have been fairly balanced but the last 18 months have seen acquisitions move notably ahead to where they now make up 40% of all deals.
In terms of deal activity, Cayman was followed by Hong Kong (334 deals), the British Virgin Islands (236 deals) and Bermuda (146 deals). Jersey was the offshore leader in terms of total value in the first half of 2018 as a result of the Shire PLC acquisition.
Acquirer Deals Involving Offshore Buyers Continue to Rise
While the primary focus of Offshore-i is on transactions in which offshore targets are purchased by investors, the report also examines deals in which the acquirer is based offshore. There were 1,640 outbound deals worth a combined USD187bn in the first half of 2018, with offshore companies reaching some 75 countries outside the region.
China, the U.S. and the U.K. make up the bulk of the locations targeted while Australia and Singapore have seen a lot of interest as well. Western Europe saw a high concentration of USD billion-dollar deals – Finland, Italy, Luxembourg, Spain, Switzerland and the U.K. were all recipients of high value offshore attention.
The top 10 outbound deals were each worth over USD3bn and include the purchase of Patrón Spirits International AG, maker of the popular Patrón tequila, by global spirits giant Bacardi, which is headquartered in Bermuda. Half of the top 10 targets were data processing companies.
Key Findings of H1 2018:
• The total value of M&A deals involving offshore targets was USD216bn, almost as much as all of 2017.
• There were 28 deals worth at least USD1bn, including six worth over USD5bn.
• There were 180 announced IPOs, more than any half-year period on record.
• The average size of an offshore deal was USD161m, higher than any other world region.
• Eighty countries worldwide conducted offshore deals in the first half of the year.
• The finance and insurance sector alone accounted for a third of all offshore activity seen in the first half of 2018.
• Cayman remained home to the largest number of deals, while Jersey was home to the largest deal value due to the USD62bn acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical.
• Private equity is at a crossroads, with funds sitting on record amounts of cash reserves but facing challenges due to high valuations and rising competition from free-spending corporations with lower performance expectations.
• There were 1,640 outbound deals coming out from the offshore region, worth a combined USD187bn. The top 10 outbound deals were each worth over USD3bn.