Offshore deal flow readjusts following record 2015

19 October2016

Average offshore deal size remains biggest of any world region, Appleby reports

Following a record-setting 2015, the number and value of offshore M&A deals fell in the first half of 2016 to levels more familiar prior to last year’s boom, 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 during the first half of 2016. While the volume and value of deals involving offshore targets dropped in the first half of this year when compared to the second half of 2015, the report did find that the offshore markets continue to record the largest average deal size for any of the world’s regions, at USD72m.

“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,” said 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."

The report attributes the drop-off in volume in the first six months of the year in part to the 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.

The M&A environment across jurisdictions

There were 1,406 deals targeting offshore companies in the first half of this year, representing a total value of USD101bn. 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 USD4.8bn 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 percent 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.

Offshore region as acquisition force enjoying bumper period

While the report's primary focus is on deals involving an offshore target, it also examined deals in which the acquirer is based offshore. In the first six months of 2016, there were 1,443 such deals worth a cumulative USD182bn, for an average of USD120mn. 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,” said 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.”

Key findings of H1 2016:

  • There were 1,406 deals involving offshore targets in the first half of the year, down 10% on the second half of 2015. This total is likely to edge higher as late transactions are added to the figures.
  • There has now been a consistent run of over 1,400 deals per half starting in the second half 2013.
  • The total value of deals involving offshore targets in the first half of the year was USD101bn, with an average deal size of USD72m.
  • The top 10 deals were each worth in excess of USD2bn, with the biggest deal being the USD4.8bn acquisition of China’s CITIC Real Estate and BVI-incorporated Tuxiana Corporation by Hong Kong’s China Overseas Land & Investment. Six of the top 10 deals are in the technology and software sectors.
  • Once again, the 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 USD1bn.
  • The most popular deal type was capital increases, with 474 such deals in the half. The most value went on acquisitions, where USD47bn was spent in H1.
  • 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, 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 seen.
  • The top sector for announced IPOs was property development, with companies in Bermuda, Mauritius and Cayman among those seeking to list, while financial services was also popular, with several securities dealing firms intending to debut on the stock markets imminently.
  • The offshore region as an acquisition force is enjoying a bumper period and has become a regular participant in some of the biggest global transactions.
  • The offshore region remains ranked sixth in the world by deal volume for H1 2016, and still ranks fourth for value activity. Average deal size remains strong, and continuing from 2015, offshore still has the highest average deal size of any region worldwide.

 


Subscribe to Appleby's insights