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 on the first half of 2016 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 first half of 2016 and have crunched the numbers to identify trends and themes emerging from deal activity in the offshore region.
2015 was an outstanding year for transactions offshore, with over 3,000 deals being announced during the course of the 12-month period worth a combined USD444bn, setting records for both volume and value.
When we look at all M&A across the six-month period, it is once again the financial services sector that dominates. There is no doubt the industry is the dominant one in offshore markets, even if the start of 2016 did see a resurgence of activity in the mining space, and a strengthening of Technology, Media and Telecommunications (TMT) activity.
492 deals, 31bn
131 deals, 19bn
68 deals, 11bn
110 deals, 7bn
296 deals, 17bn
65 deals, 5bn
Bermuda reported a total of 196 deals in the first half of 2016
BVI saw 238 deals in total in the first half of 2016, 14% of an increase in comparison to H2 2015
Cayman was once again the primary target of offshore deals: the islands saw 459 transactions worth a cumulative USD41bn
Jersey reported 94 deals with an aggregate deal value of USD3.9bn. Guernsey, 87 deals valued at USD2.8bn and the Isle of Man saw an increase in deal value in the first half of 2016 with a total of 28 deals valued at USD1.2bn
Second to Cayman by volume was Hong Kong, with 263 deals in the first half of 2016
Combined, Mauritius and the Seychelles announced 47 deals during H1 2016, totalling an aggregate deal value of USD1.2bn
Just as important as our analysis of offshore companies as targets of M&A is coverage of the deals where the acquirer is based offshore. The offshore region works as a place for facilitating transactions smoothly and efficiently, and as such sees a lot of activity both as a target, and as a home for acquisition vehicles. Its prominence as a base for investors buying businesses both onshore and in other offshore locations remains high, and with 1,443 such deals worth a cumulative USD182bn over the period.
In all, the USD182bn that was spent by offshore acquirers in the first half is higher than any other six-month period outside of 2015, and is considerably stronger than the USD101bn spent on offshore targets so far this year. There are clear signs of a trend upwards, and the growing use of offshore acquisition vehicles for major deals: back in 2012, just 1,002 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.
At the same time, value has also increased over the period that we have been analysing these figures, and where we used to see rough alignment between the amount of money being spent on offshore targets and that being spent by offshore acquirers, we now see the latter racing ahead. Back in 2012, USD69bn was spent by offshore acquirers; today that figure has nearly trebled, as larger and larger deals are being structured through offshore vehicles.
The most active jurisdiction for offshore acquirers was Hong Kong, which saw 465 deals worth USD46.4bn in H1 2016, representing 32% of deal volume and a quarter of value. Next up was BVI with 365 deals; and then Cayman, with 307 deals.
There were 32 deals worth at least USD1billion where offshore was the acquirer. By comparison, there were 19 billion-dollar deals where offshore was a target in the same period. All of the top 10 outbound deals were each worth in excess of USD3bn, with one giant deal standing out, being the USD32bn acquisition of US pharma group Baxalta by Shire Pharmaceuticals, incorporated in Jersey. As with inbound deals, we see a healthy spread of sectors, with healthcare, TMT and real estate again being well represented.
The companies targeted in the top 10 have a worldwide spread; three involve US targets, while there are two deals for Chinese companies, and then one each for Cayman, Finland, Germany, Japan and Kuwait.
An analysis of the volume of deals in which each country’s businesses are targets, versus the number in which the country’s businesses are the acquirers, gives us an idea of how the jurisdictions are being utilised.
Cayman, as the principal target of investors, is home to many attractive companies, whereas the BVI and Hong Kong are actually more popular places to use as acquisition vehicles for deals onshore. Mauritius also sees far more outbound deals than inbound, highlighting its role as a gateway jurisdiction and acquisition base for deals into Africa and India. The British Crown Dependencies host a wide range of successful companies and are most frequently the acquisition target of companies based elsewhere.