Appleby: Private Equity Investment In Bermuda

November 30, 2015

The number of M&A transactions involving Private Equity [PE] investment in Bermuda in the first three quarters of this year has already eclipsed that seen in all of 2014, according to a report released today [Nov 30] by Appleby.

“Bermuda was also the offshore jurisdiction to see the largest total value of M&A transactions involving PE exits in the first three quarters of 2015,” Appleby said.

“The findings are included in a sector spotlight edition of Appleby’s Offshore-i report, which looks specifically at the transactions taking place in the PE industry in offshore markets in the year to date.

“The report provides analysis of private equity investment activity in the form of buyouts, and exits, whether via initial public offerings, sales to other private equity firms, or trade sales.

“With three months left in the year, the six PE investment deals in Bermuda already represent an increase over the five seen in 2014.

“These six deals were worth a cumulative value of USD3.3bn, or 16% of all offshore deal value involving PE investments this year, and included one of the top five offshore investments of the year – the USD1.5bn acquisition by CVC Capital Partners LTD Investors of a minority stake of Fidelis Insurance Holdings Ltd.

“The average deal value of PE investments in Bermuda so far this year is USD547m, above the average of USD490m seen across offshore jurisdictions.

Bermuda also saw six exits worth a total value of USD19.86bn in the first three quarters of 2015, making it the jurisdiction with the largest aggregate deal value for PE exits, the report found.

“In the highest value exit this year, Bermuda-based Freescale Semiconductor was the target in a USD16.7bn public takeover by NXP Semiconductors of the Netherlands.

Infographic provided by Appleby:

3047_PE_infographics_v5.indd

“Combined PE activity represented over a quarter of the total value of offshore M&A transactions across jurisdictions in the third quarter of 2015, putting it on pace to generate the biggest annual dollar amount the industry has seen in the past five years, the report found. The third quarter of 2015 alone saw USD16.1bn in PE deals, representing over a quarter of the USD61bn of total offshore activity.

“Three sectors are dominating offshore investment activity by PE firms this year, with Information & Communication, Professional Services and Finance & Insurance all proving highly popular with buyout funds when they are shopping offshore, according to the report.

“When it comes to exits, businesses in the Finance & Insurance sector have proved popular sales for PE firms in 2015, with seven businesses offering investment and acquisitions services changing hands during the year so far.”

“There have been 92 private equity transactions worth a combined USD56bn in the first three quarters of 2015, with Bermuda serving as a major contributor to this activity,” said Tim Faries, Partner and Group Head of Corporate in Bermuda. “The jurisdiction has already seen a rise in the number of PE investments over 2014, and the biggest PE exit so far in 2015 took place in Bermuda.”

“The total sum of 2015 investments is likely to end up topping anything seen in the previous five years, with more private equity money chasing a limited supply of companies resulting in even higher valuations,” said Simon Raftopoulos, a partner and global head of private equity at Appleby.

Other key findings of the report include:

  • The year-to-date total value of investments and exits for 2015 currently stands at USD56bn, not far behind the 2014 annual total of USD60bn. With three months still to go, this year looks likely to exceed deal values for any of the last five years.
  • There were 41 investments by PE firms involving offshore targets so far this year and 55 exits. The exits typically command more value, with the average value of an investment in 2015 coming in at USD490m, and the average exit worth USD673m.
  • There have been seven PE investments of USD1bn or more involving offshore targets so far in 2015. These transactions have accounted for 79% of the year’s PE deal value to date.
  • The largest PE transaction announced this year involving an offshore target is the USD4.3bn capital increase by Hutchison Whampoa, owner of the new parent company of telecoms groups O2 and Three Ireland, to bring in a group of co-investors to buy new shares in the business.
  • The most active PE investor in the offshore market so far this year has been Temasek Holdings, the sovereign wealth fund that is owned by the Government of Singapore.
  • The majority of PE investment deals taking place offshore involve minority stakes changing hands. In all, 22 of the 41 offshore private equity investments that have taken place in 2015 so far have been minority stake deals.
  • 2015 appears set to overtake the record exit total last year of USD41.2bn. The top three exits have been a sale of 100% of the business.
  • In 2015, 15 IPOs have been either announced or completed involving private equity-backed companies. This represents 27% of the total volume of exits.
  • Of the IPOs that have occurred involving PE assets in 2015, there has been a clear shift toward the Hong Kong Stock Exchange as the capital market of choice. It was the destination for 13 of the 15 IPOs.
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