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 2018. While the total number of deals dipped when compared to 2017, value was up significantly.
“The total amount spent on offshore companies over the course of 2018 was USD 344 billion, over USD 100 billion more than 2017 and the second highest annual figure on record,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “The average deal size was USD 124 million, significantly higher than any other world region.”
Acquisitions have become increasingly popular over the last two years, compared to taking a minority stake in a company or releasing more shares to investors, and now make up nearly half of all offshore M&A activity.
“Investing companies are no longer content to just take a seat on the board, but want full control of an asset in order to gain a competitive advantage over rivals,” Adderley said. “This drive to do strategic deals is likely to continue, providing finance remains readily available, interest rates rise predictably, and markets remain stable. Gaining access to transformational technologies also remains a big incentive across almost every sector.”
The M&A Environment Across Jurisdictions
With 2,781 transactions recorded, the offshore region experienced a 5% drop in deal activity in 2018 when compared to the previous year. However, the 57 deals that each exceeded USD 1 billion, including nine megadeals in excess of USD 5 billion, fuelled a significant rise in value. This includes the largest offshore deal of the year, Takeda Pharmaceutical’s USD 58.5 billion acquisition of Jersey-incorporated Shire PLC.
The Cayman Islands led the way in total deal value in 2018, with three transactions featured in the offshore region’s 10 biggest deals. Cayman was also the busiest jurisdiction for offshore deals, recording 867. It was followed by Hong Kong (709 deals), the British Virgin Islands (504 deals) and Bermuda (307 deals).
Nearly all offshore territories reported declining levels of deal activity over the course of the year. However, in the face of geopolitical and regulatory headwinds, Hong Kong was the only jurisdiction to see an increase in activity, recording a 7% rise in deals in 2018.
Record IPO Market Continues into 2018
In total, 349 offshore companies spread over 60 different industries announced their intention to go to market. Despite stock market volatility that can sometimes lead to IPOs being cancelled, a record 196 offshore companies completed their listing in 2018, raising almost USD 33 billion.
“Investor confidence, large pools of liquidity, strong valuations and low interest rates have offset recent stock market turbulence, creating a very strong year for IPOs in the offshore region,” Adderley said. “We have seen a lot of activity from wholesale traders looking to raise extra working capital and construction companies, launching IPOs in order to invest in ongoing projects.”
Offshore IPOs typically occur on exchanges in the U.S., London or Hong Kong, with Hong Kong an especially popular choice among Cayman companies. Top sectors for announced offshore IPOs were information service activities and publishing activities.
Outbound Deal Volume Outpaces Inbound Activity
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 3,532 outbound deals announced over 2018 with a total value of USD 340 billion, which includes 66 deals worth more than USD 1 billion each.
The targets of these outbound deals were spread across the globe, with China, the U.S. and the U.K. being popular targets. Much of Western Europe is strongly represented with a high concentration of USD billion-dollar deals, as well as several large individual deals targeting the Indian subcontinent.
The 10 largest outbound deals were each worth over USD 4 billion.
Key Findings of 2018:
The total value of all offshore deals in 2018 was USD 344 billion, over USD 100 billion more than 2017.
There were 57 deals worth at least USD 1 billion, including a record nine megadeals worth over USD 5 billion each.
There were 196 completed IPOs, the offshore region’s highest-ever annual total, raising USD 33 billion.
A total of 2,781 offshore deals were announced, more than South America and Africa combined.
Investors from nearly 60 countries across the world targeted offshore companies.
The manufacturing sector saw a 135% increase in M&A value, while the construction sector accounted for 273 deals in 2018, the highest number it has seen in a decade.
Cayman was home to the largest number of deals and total deal value, while Jersey experienced a 297% increase in deal value fuelled by a USD 58.5 billion acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical.
161 Offshore-incorporated companies were targeted by investments financed via Private Equity and Venture Capital, the highest volume seen over the last five years.
There were 3,532 outbound deals coming out from the offshore region, worth a combined USD 340 billion. The top 10 outbound deals were each worth over USD 4 billion.
To read more and download the full report, visit our Offshore-i page.