Offshore-i is an Appleby report that analyses offshore deal data and provides expert insight into the world of offshore transactions. Read our latest report findings below, if you would like to read the report in full, please contact us.
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Welcome to our latest edition of Offshore-i for 2016, and our review of the offshore M&A markets this year. In this report we are looking back on the second half of 2016 and have crunched the numbers to identify trends and themes emerging from deal activity in the offshore region.
It was already clear from the start of 2016 that offshore deal activity was going to struggle to keep up with the phenomenal levels of M&A volume and value that were generated in 2015. That 12-month period set records on both counts, recording over 3,000 deals worth USD444bn, and so 2016 had a lot to live up to. For the year as a whole, the cumulative value was USD234bn, but we consider the fall to be nothing more than a return to business as usual, in line with all the other major world regions, as transactions reset to the levels we had become used to before the 2015 outlier.
Deal-making has now slowed substantially amid considerable economic and political uncertainty in several key economies, with the most notable events being the Brexit decision in the United Kingdom, and the presidential election in the United States. However, given the predictions of some of the doomsayers about how horrendous the macroeconomic implications of both votes could have been, instead these latest M&A figures make for rather positive reading.
The finance sector dominates offshore deal activity. It is made up of the subsectors of financial services and insurance companies, as well as auxiliary firms such as brokerages. In all, this group reported 950 deals across 2016, with a cumulative value of USD65bn.
The sector continues to stand well ahead of others by any measure: the second busiest sector by deal volume and value is manufacturing, with transactions worth USD43bn, still a third less than the activity seen in financial services. Another strong contender is the fast-evolving information and communications sector, with USD37bn-worth of deals.
Bermuda reported a total of 420 in 2016, with a combined value of USD46.8bn. It had the highest average deal size of USD112m, the only triple-digit average recorded offshore
BVI had a strong 2016, recording 516 deals worth a cumulative USD44.9bn, as against 406 deals worth USD50.8bn in 2015. The mining & rental sectors were notably busy
Cayman Islands are the most popular destination for overseas acquirers targeting offshore assets, accounting for a third of all the deals that took place offshore in 2016, with 920 transactions worth a cumulative deal value of USD83.7bn
Jersey reported 168 deals with an aggregate deal value of USD8.6bn. Guernsey, 175 deals valued at USD5.5bn and the Isle of Man saw an increase in deal value in 2016 with a total of 67 deals valued at USD6.4bn
Unlike most countries, Hong Kong saw deal numbers nudge up slightly year-on-year, with 555 transactions handled for its targets in 2016 compared to 523 the year before. Value was USD36.2bn
Combined, Mauritius and the Seychelles announced 87 deals during 2016, totalling an aggregate deal value of USD2.9bn
In many ways, it is the acquisition side of offshore M&A that stands out in the 2016 figures. While the bulk of this report concerns transactions in which offshore targets are purchased by investors, what has increased dramatically over the lifetime of the Offshore-i is the number of deals in which companies based offshore are the acquirers.
It was in 2014 that we first witnessed the volume and value of deals involving offshore acquirers overtake the volume and value of deals involving offshore targets and since then this trend has only grown more pronounced. The acquisition side is made up of a combination of existing offshore companies and new holding companies, establishing offshore by dealmakers to take advantage of the many technical, legal and regulatory advantages of these jurisdictions.
While the rundown of the 10 largest transactions for 2016 shows a predominance of real estate and insurance-related transactions, when we delve deeper we find an incredibly broad spread of activity across sectors. In all, 38 subsectors show substantial investment of at least USD1bn over the year, the highest spread that we’ve recorded in recent years.
Outside of the familiar areas like construction, finance and information technology, there were several new subsectors on the rise, including the health industry and several other personal service and administrative industries.