The Cayman Islands held on to its spot as the top jurisdiction for offshore M&A transactions in 2017, recording about one-third of all deals and total deal value, 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 course of 2017. In addition to the rise in deal activity, it also found that 2017 was the busiest year on record for offshore IPOs.
“Cayman continued to lead the pack in offshore deal volume and value in 2017, accounting for the largest portion of the offshore region’s deal activity and three of the year’s four largest offshore deals,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “Increased deal flow from U.S.-based corporations and private equity firms contributed to the offshore region’s encouraging performance.”
Cayman Stands Out as Principal Target for Investors, IPOs
Over the course of 2017, Cayman-incorporated companies were the target of 839 transactions worth a combined USD78bn, representing 34% of total offshore deal value. Transactions were up from the previous year’s total of 773, while deal value was down slightly from the USD79bn recorded in 2016.
The largest offshore deal of 2017 was the USD6.8bn purchase of all the issued shares of Belle International, a Cayman-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange. Cayman was home to two of three megadeals – those valued at USD5bn or more – that occurred across the offshore region over the course of the year.
Last year saw well over 300 IPOs announced across the offshore region, making it by far the busiest year on record. Cayman-incorporated companies were responsible for the vast majority of the 179 IPOs that were completed over the course of the year.
The M&A Environment Across Jurisdictions
In total, there were 2,771 deals targeting offshore companies in 2017, representing a total value of USD227bn, the report found. This marked an increase over 2016, which saw 2,735 deals recorded at a value of USD219bn.
While the Cayman Islands held on as the busiest jurisdiction for offshore transactions in 2017, Hong Kong and the British Virgin Islands followed suit with 592 and 505 deals respectively.
Looking forward, the report points to a number of factors that could impact M&A in the coming months, including U.S. tax reforms and regulatory scrutiny, the Chinese government’s concern over outbound deals and the deployment of private equity, among others.
Acquirer Deals Involving Offshore Buyers Continue to Rise
Though 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. Up until 2014, there was parity between the levels of activity inbound and outbound from the offshore region. Since that time, however, offshore companies on the acquire-side have come to dominate, and the report found that figures from 2017 continue to reflect this.
The year 2017 recorded 3,313 such deals worth a cumulative USD347bn. China, the U.S., India and the UK make up the bulk of the locations targeted but there were also many large deals conducted elsewhere, such as the $1bn institutional buy-out of Portugal’s Novo Banco by Bermuda-registered private equity firm, Lone Star.
Key Findings of 2017:
• The total value and volume of offshore M&A deals rose when compared to 2016. The year saw 2,771 deals worth a total of USD227bn.
• The top 10 deals were each worth well over USD2bn, with the largest offshore deal being the USD6.8bn purchase of all the issued shares of Belle International, a Cayman Islands-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange.
• The finance and insurance sector dominated the offshore landscape in terms of deal value.
• Acquisitions in the real estate sector make up the main theme of this year’s highest value deals. Software development also continues to attract significant acquisitions, as companies compete to build market-share in this rapidly evolving sector.
• Cayman remained home to the largest number of deals, followed by Hong Kong, the BVI and Bermuda.
• The offshore region saw well over 300 IPOs reported, making it by far the busiest year on record.
• Despite the new regulatory restrictions, China continued to be the prominent acquirer of Offshore targets, with the UK, Taiwan and the U.S. also highly placed.
• 128 deals targeting Offshore-incorporated companies were financed via private equity and venture capital, for a total value of $40bn. After a relatively quiet 2016, this marks a considerable uptick in offshore activity.
• There were 3,313 outbound deals coming out from the Offshore region, worth a combined USD 347bn. The top outbound deals, the highest value offshore-related deals over the year, show a healthy spread of sectors, including logistics, manufacturing and banking institutions.