Appleby: Bermuda Leader In Q1 M&A Deals

May 19, 2015

Bermuda recorded the highest cumulative value of M&A deals and IPOs in the first quarter of 2015 among offshore jurisdictions, according to a report released today [May 19] by Appleby.

The latest edition of Offshore-i, an Appleby report that provides data and insight on corporate transaction activity in the major offshore financial centres, focuses on deals announced during the first quarter of 2015.

Overall, the total cumulative value of transactions remained robust in Q1, with the average size of each deal among the highest on record. While there was a significant drop in the number of transactions across the jurisdictions examined when compared to the previous quarter, the total deal value of USD68.3bn remained level due in part to three megadeals each worth in excess of USD5bn.

“Bermuda continues to be an active destination for offshore deal activity, accounting for more than a quarter of the total offshore deal value in Q1 2015,” said Timothy Faries, Partner and Group Head of Corporate in Bermuda. “The boom in insurance deal activity has been going on for a few quarters now and continues to accelerate, particularly in the US, and in Bermuda from an offshore perspective. The activity is driven by acquirers’ desire to achieve scale and efficiencies in challenging market conditions.”

Bermuda Leads in Deal Value, Insurance Top Sector

Appleby said, “Bermuda saw the highest cumulative deal value of Q1 2015, and recorded an 81% increase in value over the same quarter of last year. The jurisdiction had 84 deals worth a total USD19bn, accounting for 28% of offshore deal value.

“Contributing to the high sum, Bermuda was home to three of the quarter’s top 10 deals, all in the insurance sector. In one of the three offshore megadeals announced in Q1, Axis Capital Holdings Limited and PartnerRe Ltd. agreed to enter into a “merger of equals,” a business combination producing the world’s fifth largest reinsurance company, with a capitalisation in excess of USD11bn.

“In addition, XL Group plc acquired Catlin Group Limited for USD4.2bn, and Endurance Specialty Holdings paid USD1.8bn for reinsurer Montpelier Re Holdings, in another purely Bermuda-based deal. Appleby attorneys have advised on each of these deals.

The Transactions Environment Across Jurisdictions

There were 537 deals in Q1 2015, down 24% from the previous quarter. Deal value in the first three months of year, however, registered at USD68.3bn, which matches the previous quarter and is among the highest in the last decade.

“At more than USD68bn for the first quarter of the year, cumulative deal value remains at the same high level as the preceding quarter, despite there being more than 150 fewer transactions,” said Cameron Adderley, Partner and Global Head of Corporate. “The result, clearly, is a bumper average deal size, which has been topped in only two quarters over in the past decade.”

This quarter’s average deal size came in at USD127m, fuelled by 14 deals worth more than a billion dollars each, including three USD5bn-plus deals and an additional two deals worth more than USD4bn each. Looking back as far as 2004, there has only been one previous quarter that included three USD5bn deals, and in that case, two of the three were related to a single transaction, the acquisition of TNK-BP.

“Low interest rates and cash on balance sheets have helped drive big deals, while M&A has proved a quick way to add revenue at a time when existing markets are mature or subdued, and opportunities for growth appear limited,” Appleby said.

“There is also evidence that the rise of the megadeal is a global phenomenon that may be driven by more targeted M&A decision-making post-crisis, with acquirers willing to make sizeable investments but only after scrupulous analysis of targets.”

Key themes of Q1 2015:

  • There were 537 deals in the quarter, the lowest quarter by deal volume since the start of 2008. The total is likely to edge higher with late reporting of deals.
  • The value of deals was USD68.3bn, almost identical to the previous quarter and before that topped only a handful of times in the past 10 years. With value the same and more than 150 fewer deals than Q4 2014, average deal size is up to USD127m, one of the highest on record.
  • This is the fifth quarter in the last six to record more than 10 deals worth over USD1bn, after only four such quarters in the preceding decade. There were 14 billion-dollar deals in total in Q1 2015, including five deals worth in excess of USD4bn each.
  • The financial and insurance activities sector was once again on top, thanks to three insurance-related deals featuring in the top 10 for the quarter. Deal value remains widely dispersed with 14 subsectors showing cumulative deal activity worth more than USD1bn.
  • Capital increases are the most popular deal type, closely followed by acquisitions, which similarly represent about a third of total deal volume. Acquisitions dominate by deal value.
  • Q1 was one of the busiest quarters ever for outbound deals involving offshore acquirers, with 542 outbound deals worth USD84.7bn, a sum that makes it the second biggest quarter yet recorded. Outbound deal value jumped 32% from the previous quarter, which was part of a record-breaking 2014.
  • The offshore region remains ranked sixth in the world by deal volume for Q1 2015, and stays in fourth for value activity. By average deal size the region rose to second worldwide, behind only North America, as a result of the run of megadeals using offshore jurisdictions.
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