Appleby: Cayman sees five-year high in deal activity

Offshore deal value across jurisdictions rises 56% in 2015, Appleby report finds

The Cayman Islands saw a five-year high in the number of local M&A deals in 2015, accounting for approximately a third of the deal volume and over a quarter of the deal value for the entire offshore region, according to a report released on Thursday 3 March 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 course of 2015. The total cumulative value of offshore M&A deals across all offshore jurisdictions measured in the report in 2015 increased  56 per cent over the previous year, with average deal value topping highs not seen since 2007, the report found.

“For four years now, we have seen the Cayman Islands ranked as the most popular destination for investors seeking to acquire offshore assets,” said Simon Raftopoulos, a Cayman-based partner and member of the firm’s Corporate Finance and Private Equity teams.

“With nearly 1,000 deals recorded in 2015, Cayman had another standout year and was a significant contributor to a robust year for transactional activity in the offshore markets by all key metrics—deal value, deal volume and average deal size,” he said.

The law firm found that Cayman remained the busiest jurisdiction in 2015, with increases in both deal volume and value.

Cayman attracted 974 deals in 2015, nearly twice the number of the next busiest jurisdiction, the report found. The transactions were worth a cumulative US $125 billion, marking a 14 per cent rise in deal value over 2014. Both the number of deals and the average deal size (US $129 million) experienced seven per cent year-on-year growth.

Two of the 10 largest transactions of 2015 involved Cayman-incorporated companies as targets. In one notable institutional buyout, Qihoo 360 Technology, a software publishing business incorporated in Cayman, was sold to True Thrive, a consortium of investors also incorporated in Cayman, for US $9.3 billion. The deal reflects the trend of large transactions emerging in the information and communications space. Appleby advised on this deal and closing is subject to standard closing terms and conditions.

When looking at IPOs involving offshore-incorporated companies, Cayman was again a leader, despite a drop in the number of offshore IPOs that have completed a listing over the last 12 months. Of all the IPOs that completed during 2015, the majority – 45 out of 82 – concerned the listing of a Cayman-incorporated company.

Three of the largest quarterly periods of the last decade occurred in 2015 and contributed to a cumulative deal value of US$442 billion across offshore jurisdictions. The year also saw an impressive nine megadeals worth in excess of US$5 billion each and more than US$150 billion when combined.

There were 75 deals each worth in excess of US$1 billion across the year, well above the 52 recorded in 2014. When looking at the full year, the annual average deal size closed at US$149 million, far ahead of the previous record, which was set back in 2007 when the annual average deal size stood at US $99 million.

The top 10 biggest deals of 2015 were collectively worth US$163 billion, only 37 per cent of the full year deal total, demonstrating the strength in depth of high value deals over the course of the year. Additionally, 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, the report found.

“The offshore markets are thriving and enjoying some of the best deal activity ever witnessed,” said Frances Woo, Managing Partner of Appleby’s Hong Kong office. “Offshore saw more value than the Middle East, Africa, Eastern Europe, South and Central America combined. Although 2016 remains fraught with uncertainty and challenges at the macroeconomic level could slow global deal activity, we are quietly optimistic that such good news will continue in 2016.”

Insurance and financial services continued to dominate in 2015, accounting for 883 deals or 30 per cent of the total. Rounding out the top five were manufacturing (with 610 deals); information and communications (287); construction (233); and mining and quarrying (192).

The report also noted that half a dozen sub-sectors have seen at least 45 per cent growth in deal volume over the last three years. Among these, food and beverage services, crops and livestock, mining of coal and lignite and specialist construction all stand out, with the others being accommodation and telecommunications.

In addition, a further six manufacturing subsectors, ranging from leather goods to pharmaceuticals, have all also witnessed similarly impressive levels of growth.

The Appleby report found certain key themes for 2015.

In volume terms, with 2,969 deals recorded so far, 2015 has matched the biggest on record, 2,966 back in 2010.

The annual deal value of US $442 billion was the largest Appleby has ever recorded. The annual average deal size of US $149 million is the highest yet recorded, far out-triumphing the previous high of US $99 million set back in 2007.

There were 75 mammoth deals each worth at least US $1 billion across the year, compared to 52 throughout 2014.

The top five deals are each worth in excess of US $9 billion, with the largest deal being the US $43 billionn sale of Hong Kong-based Nanyang Commercial Bank. Three of the top five deals were Hong Kong targets.

Cayman has shown strong positive growth year-on-year since 2012, while Jersey, Mauritius and the Seychelles also show a consistent upward trajectory in deal volumes.

The three dominant deal types for offshore deals continue to be minority stakes, capital increases and acquisitions. The majority of the largest deals in 2015 were offshore acquisitions, accounting for eight of the top ten largest deals and over US $250 billion total spent.

The offshore region as an acquisition force is enjoying a bumper period. Offshore has become a regular participant in some of the biggest transactions of the year; while annual volume has remained steady, value has catapulted upwards, increasing almost US $200 billion against the previous year.

Offshore has the highest average deal size of any region worldwide. The offshore region’s 56 per cent increase in value compared to the previous year outpaced all other regions.