Appleby: Deal Volume On The Rise In Bermuda
Bermuda experienced a nearly 50% spike in the volume of M&A deals and IPOs in Q2 when compared to the first quarter of the year, according to a report released today [Sept 14] 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 second quarter of 2015. The quarter recorded 732 deals across jurisdictions–an increase of 25% when compared to the first quarter of the year– worth a cumulative USD94.4bn.
“Bermuda contributed to a robust quarter for offshore deal activity by recording a substantial rise in deal volume in Q2,” said Timothy Faries, Partner and Group Head of Corporate in Bermuda. “The insurance and financial services sector led offshore activity in Q2, with Bermuda continuing to serve as a popular jurisdiction for this industry.”
Bermuda was home to 127 deals in the second quarter of the year, representing a 46% increase in deal activity over the previous quarter and 43% rise over the second quarter of 2014, the report found. Cumulative deal value dropped slightly in the second quarter of the year when compared to the first but was up 32% over the same quarter last year.
The Transactions Environment Across Jurisdictions
When combined, the first two quarters of 2015 saw a total of USD225bn spent on offshore deals, well ahead of the previous record for a first-half period, which was the USD159bn spent in 2014. Average deal size in the second quarter of 2015 was recorded at USD129m, a value topped only twice in the past decade, and bringing average deal value for the first half of the year to USD176m.
Additionally, six of the last seven quarters have now announced more than 700 deals each and a drop-off witnessed in the number of offshore transactions in Q1 now looks to have been a blip as the market paused for breath after a strong and busy 2014.
The report found much deeper activity levels across the value ranges in the second quarter. Twenty-one deals worth over a billion dollars each were recorded in the quarter, six more than the previous record of 15 billion-dollar deals in a three-month period.
“Globally, deal values are increasing at a much faster rate than volumes, as shrewd acquirers learn the lessons of the past and become more selective of their targets, and at the same time more willing to invest large sums in the right deals,” said Cameron Adderley, Partner and Global Head of Corporate. “Buyers are willing to pay a premium for acquisitions that help them to achieve long term strategic ambitions.”
Key themes of Q2 2015:
- There were 732 deals in the quarter, up 25% on the 586 recorded in the first quarter of the year. Six of the last seven quarters have now recorded more than 700 deals each.
- The value of deals was USD94.4bn, down on the massive total of USD130.6bn seen in the previous quarter but the third highest quarter recorded in the last decade. The first half total of USD225bn far outstrips the previous record for a first half, which was USD159bn.
- There were no fewer than 21 deals worth over a billion dollars each in Q2 2015, six more than the previous record of 15 billion-dollar deals in a three-month period. This is the sixth quarter in the last seven to record more than 10 billion-dollar deals, after only four such quarters in the preceding decade.
- The financial and insurance activities sector was once again on top, thanks to insurance and reinsurance deals continuing to feature heavily offshore. Deal value remains widely dispersed with 20 subsectors showing cumulative deal activity worth more than USD1bn each, up on the 15 subsectors at that level in Q1.
- Capital increases are the most popular deal type once again, followed by minority stakes and acquisitions.
- As usual, the Cayman Islands dominated deal volumes as the top target, accounting for more than a third of all deals done offshore. Bermuda, the BVI and Hong Kong were largely level-pegging behind, and the same was true in value terms. The value of deals done in Cayman in Q2 stood at USD38bn, double that recorded in Q1.
- Q2 2015 was another busy quarter for outbound deals involving offshore acquirers, with 652 outbound deals worth USD79bn, as the offshore world continues to spend big. The average deal by an offshore acquirer was worth USD122m in Q2, the third highest average deal size recorded in any quarter since 2004.
- Measured by average deal size, the offshore region is still second worldwide, behind only North America. More money was spent on offshore targets than was spent on deals in Eastern Europe, Africa, the Middle East and South and Central America combined.
The offshore region remains ranked sixth in the world by deal volume for Q2 2015, and stays in fourth for value activity.
Friendly reminder:
The last time we saw this level of M&A activity was before the Market Crash of 2008.
M&A activity upticks signal weakening economies not strong ones…
Of course the dislikes will follow as I am a “naysayer” but I am preparing myself as best I can for the “correction” that is already in its beginning phases so should you. This is all fluff soon set to find its economic equilibrium so to speak.
Fun Fact 1: 9 of the largest 20 trading days on record happened during the September 2008 crisis/meltdown/correction we are still “recovering” from.
Fun Fact 2: 9 of the 20 single largest trading days have happened since mid August 2015 and into this month. Sound familiar?
Get prepared folks..
Orange — that is too simplistic. M&A activity isn’t much different from the real estate market, the stock market or any other investment involving a bit of risk — it increases when people can afford to take risks and predict the market will rise. Those predictions might be right or wrong, so M&A activity doesn’t mean much for how the economy will be doing in the future.
A much bigger and more immediate worry for the Bermuda economy is government debt, which will put pressure on the government to raise taxes, which will drive out international business.
But he is right about what is inevitable…information is out there you just gotta search for it …definitely not in the mainstream media though.
So with all this deal volume on the rise in revenues for my employer does it also mean my salary finally goes up from a paltry $75,000 a year?
Or will I still be told, yet again in Q1 with my annual review “be happy to have a job during this recession don’t you see how many support staff we have laid off” even although I qualified some time ago not and routinely do a 50+ hour week
In UK over 400,000 people including regular tellers up to SVPs and employees are part of Trade Unions in sectors like law firms, insurance companies and even the finance and banking sector