M&A Transaction Value Doubled In First Half

September 19, 2018 | 0 Comments

According to a report released by law firm Appleby, the “total value of M&A transactions in Bermuda more than doubled in the first half of 2018 when compared to the final six months of the previous year.”

The law firm said, “The total value of M&A transactions in Bermuda more than doubled in the first half of 2018 when compared to the final six months of the previous year, with the jurisdiction home to three of the offshore region’s 10 biggest deals, according to a report released today 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 first half of 2018. Following a similar pattern to most of the world’s regions, the volume of offshore deals has fallen back from levels seen in the latter half of 2017, while value is on the rise.

“Bermuda remains a popular choice for offshore deal making as evidenced by the increase in total deal value and the size of deals involving Bermuda-incorporated companies,” said Timothy Faries, Bermuda managing partner and group head of Corporate in Bermuda.

“With a focus on increasing transparency and fostering the burgeoning financial technology sector, Bermuda will continue to be at the heart of significant global transactions.”

“Like the offshore region as a whole, Bermuda saw its volume of deals drop in the first half of 2018 when compared to the second half of 2017. However, the total deal value of USD33.86bn in the first six months of the year represented a 111% increase over the last half-year period.

“The rise in value was fuelled in part by three of the 10 biggest offshore deals in the first half of 2018 involving Bermuda companies. They included two significant reinsurance deals, the USD15.3bn acquisition of XL Group Ltd by AXA and the USD5.56bn acquisition of Validus Holdings, Ltd. by American International Group, Inc., which Appleby worked on. It also included the USD2.35bn acquisition of a 64% stake in Joy City Property, Ltd by COFCO Property [Group] Co., Ltd.

The M&A Environment Across Jurisdictions

“In total, there were 1,344 deals recorded in the first half of 2018, representing a 10% decrease when compared to the last six months of 2017. The total deal value of USD216bn, meanwhile, marked a 68% increase over the second half of 2017 and was driven in part by the USD62bn acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical. Each of the offshore region’s 10 biggest deals was worth more than USD2bn.

“The most frequent types of deals were acquisitions, capital increases and minority stakes in other companies. Typically, these three categories have been fairly balanced but the last 18 months have seen acquisitions move notably ahead to where they now make up 40% of all deals.

“Increasingly, firms are choosing to top up an existing stake and secure control of an investment outright,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “This makes sense with the increasing competition for quality targets, a low-risk environment and easy access to finance.”

“Billion-dollar deals have become frequent in the offshore region, with 28 reported in the first half of this year. The surge of big transactions has been bolstered by a desire by boards of major companies to head off disruptive technological threats and accelerate growth, according to the report.

Acquirer Deals Involving Offshore Buyers Continue to Rise

“While 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. There were 1,640 outbound deals worth a combined USD187bn in the first half of 2018, with offshore companies reaching some 75 countries outside the region.

“China, the U.S. and the U.K. make up the bulk of the locations targeted while Australia and Singapore have seen notable interest as well. Western Europe saw a high concentration of USD billion-dollar deals – Finland, Italy, Luxembourg, Spain, Switzerland and the U.K. were all recipients of high value offshore attention.

“The top 10 outbound deals were each worth over USD3bn and included the purchase of Patrón Spirits International AG, maker of the popular Patrón tequila, by global spirits giant Bacardi, which is headquartered in Bermuda. Half of the top 10 targets were data processing companies.

Key Findings of H1 2018:

  • The total value of M&A deals involving offshore targets was USD216bn, almost as much as all of 2017.
  • There were 28 deals worth at least USD1bn, including six worth over USD5bn.
  • There were 180 announced IPOs, more than any half-year period on record.
  • The average size of an offshore deal was USD161m, higher than any other world region.
  • Eighty countries worldwide conducted offshore deals in the first half of the year.
  • The finance and insurance sector alone accounted for a third of all offshore activity seen in the first half of 2018.
  • Cayman remained home to the largest number of deals, while Jersey was home to the largest deal value due to the USD62bn acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical.
  • Private equity is at a crossroads, with funds sitting on record amounts of cash reserves but facing challenges due to high valuations and rising competition from free-spending corporations with lower performance expectations.
  • There were 1,640 outbound deals coming out from the offshore region, worth a combined USD187bn. The top 10 outbound deals were each worth over USD3bn.”
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