This article examines in detail the nature of the deals seen in 2015, the possible factors driving up the overall value of these deals and finally, what 2016 may hold.
The nature of deals in 2016
In 2015 (perhaps unsurprisingly), insurance and financial services sectors continued to dominate the offshore transactions landscape. However, there has also been an emergence of deals in the information and communications sector, which continues to grow. In fact, three of the top five deals in the last quarter of 2015 were in this sector.
In addition, management and institutional buyouts saw some popularity with sums certainly worthy of mention.
There are essentially three core types of acquirer deals in the offshore world:
1. Minority Stake: There has been a big surge in popularity in these deals, up 15 percent from 2014. These transactions involve an initial stake in a company being acquired by a private equity firm, or an addition to an existing stake being bought for strategic purposes. With an offshore company involved, timing is not a significant hurdle, regulatory consent (where required) is relatively painless and efficient, and the certainty of law and structural precedence ensures smooth stakeholder acquisition.
2. Capital Increases: These involve companies selling more shares to their own shareholders, rather than third parties, as part of a fundraising. This is the most frequently seen deal type. Familiarity of investor base, aggressive timelines and a cash-rich environment all encourage and facilitate capital increase as a preferred method of funding.
3. Acquisitions: The majority of large deals fall within this pillar, with over $250 billion spent on offshore acquisitions alone in 2015. The value of the offshore region as a neutral venue for international deals is highlighted by the fact that just three of the top 10 involved acquisition companies that are based onshore.
With increasing activity, it seems that offshore legislation is striking the right balance between being sufficiently robust, but also able to be understood and applied as well.
In particular, Cayman Islands legislation as to mergers and acquisitions is now widely familiar and accepted. Investors understand the thresholds and a Cayman acquisition is a market standard. Take for instance the well developed area of dissenting shareholders and accompanying case law. Investors take comfort in this area.