Offshore Deals In 2017 Outpace Previous Year

April 12, 2018

The number and value of offshore M&A deals rose in 2017, making it one of the busiest years recorded for the region, according to a report  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 over the course of 2017. In addition to the rise in deal activity, it also found that 2017 was the busiest year on record for offshore IPOs.

“In the face of the substantial geopolitical uncertainty which overshadowed 2017, the offshore region’s positive performance is all the more remarkable,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “These deals were led prominently by acquisitions, although a number of companies also chose to add additional financing firepower by issuing new stocks and bonds to eager investors.”

The report points to a number of factors that could impact M&A in the coming months, including U.S. tax reforms and regulatory scrutiny, the Chinese government’s concern over outbound deals and the deployment of private equity, among others.

The M&A Environment Across Jurisdictions

In total, there were 2,771 deals targeting offshore companies in 2017, representing a total value of USD227bn, the report found. This marked an increase over 2016, which saw 2,735 deals recorded at a value of USD219bn.

Each deal in the offshore top 10 in 2017 was worth well over USD2bn, with the largest offshore deal being the USD6.8bn purchase of all the issued shares of Belle International, a Cayman Islands-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange. Over the course of the year, the offshore region saw three megadeals – those valued at USD5bn or more.

With 402 deals valued at USD36.9bn, Bermuda represented 15% of deal volume and 16% of deal value across the offshore region in 2017.

Offshore IPOs Experience Bumper Year

Well over 300 IPOs were reported across the offshore region in 2017, making it by far the busiest year on record. The top sector for announced IPOs is technical and engineering consultancy, for fundraising to assist with project finance and the acquisition of additional equipment.

“In 2016, companies delayed IPOs amid heightened volatility in the financial markets,” Adderley said. “This pent-up demand was released in 2017 and IPO announcements by offshore-incorporated companies are at an all-time high.”

The offshore region also experienced a busy year with completed IPOs, seeing 179 companies successfully complete their listing. Hong Kong exchanges are the most popular for offshore companies, followed by U.S. and London exchanges.

Acquirer Deals Involving Offshore Buyers Continue to Rise

Appleby said, “Though 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.

“Up until 2014, there was parity between the levels of activity inbound and outbound from the offshore region. Since that time, however, offshore companies on the acquire-side have come to dominate, and the report found that figures from 2017 continue to reflect this.

“The year 2017 recorded 3,313 such deals worth a cumulative USD347bn. China, the U.S., India and the UK make up the bulk of the locations targeted but there were also many large deals conducted elsewhere, such as the $1bn institutional buy-out of Portugal’s Novo Banco by Bermuda-registered private equity firm, Lone Star.

“In the fourth largest deal of the year involving an offshore acquirer, Bermuda-incorporated Marvell Technology Group Ltd acquired Cavium Inc., a U.S. electronic components manufacturer for USD6.8bn.

Key Findings of 2017:

  • The total value and volume of offshore M&A deals rose when compared to 2016. The year saw 2,771 deals worth a total of USD227bn.
  • The top 10 deals were each worth well over USD2bn, with the largest offshore deal being the USD6.8bn purchase of all the issued shares of Belle International, a Cayman Islands-incorporated footwear manufacturer listed on the Hong Kong Stock Exchange.
  • The finance and insurance sector dominated the offshore landscape in terms of deal value.
  • Acquisitions in the real estate sector make up the main theme of this year’s highest value deals. Software development also continues to attract significant acquisitions, as companies compete to build market-share in this rapidly evolving sector.
  • Cayman remained home to the largest number of deals, followed by Hong Kong, the BVI and Bermuda.
  • The offshore region saw well over 300 IPOs reported, making it by far the busiest year on record.
  • Despite the new regulatory restrictions, China continued to be the prominent acquirer of Offshore targets, with the UK, Taiwan and the U.S. also highly placed.
  • 128 deals targeting Offshore-incorporated companies were financed via private equity and venture capital, for a total value of $40bn. After a relatively quiet 2016, this marks a considerable uptick in offshore activity.
  • There were 3,313 outbound deals coming out from the Offshore region, worth a combined USD 347bn. The top outbound deals, the highest value offshore-related deals over the year, show a healthy spread of sectors, including logistics, manufacturing and banking institutions.
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