Cayman remains offshore deal leader

| 21/05/2015 | 2 Comments

(CNS Business): While the number of offshore deals took a plunge in the first quarter when compared to the previous quarter for the Cayman Islands, reports show the significant spike in the average deal size is what keeps the islands on the map as the busiest jurisdiction for offshore transaction at the start of 2015. The latest edition of Offshore-i, an Appleby report, revealed insight on corporate transaction activity in the major offshore financial centres and showed the deal size of mergers, acquisitions and initial public offering reached the highest on record for the islands. When compared to last quarter findings show the total deal value of US$68.3 billion remained level, due in part to three mega-deals each worth in excess of US$5 billion.

The Offshore-i reported stated that, like most offshore jurisdictions, Cayman was down in the deal volume, however the jurisdiction experienced a 160 percent jump in deal value, recording cumulative spending of US$17.4 billion in the first three months of this year.

The report findings show the high deal value was fueled in part by three deals worth an excess of US$ 1 billion, including the acquisition of Cayman-incorporated communication equipment manufacturer, Highlight Holding, by Bermuda-based Highlight China for US$4.7 billion.

Cayman saw 132 transactions in total, representing 25 percent of all deals. As for the islands competitors, the British Virgin Islands followed behind with 85 deals, Bermuda with 84 and Hong Kong, where 80 deals were recorded.

“Cayman was again a major contributor to overall offshore deal activity in the first three months of this year, accounting for a quarter of all transactions and 20 of the 34 IPOs recorded,” said Simon Raftopoulos, Cayman-based partner and member of the firm’s cooperate finance and insurance teams.

While the majority of the report focuses on international acquirers buying offshore assets, Offshore-i also examined outbound deals in which an offshore jurisdiction acted as an acquirer, and with US$31.2 billion the Cayman Islands recorded the most spending overseas transactions. This contributed to a quarter in which offshore jurisdictions spent a total of US$84.7 billion, an increase of 32 percent over Q4 of 2014.

Altogether, there were 537 first quarter deals in 2015, which represents a 24 percent decrease from the number of deals in the previous quarter.

“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,” Cameron Adderley, Partner and Global Head of Corporate said. “The result, clearly, is a bumper average deal size, which has been topped in only two quarters over in the past decade.”

The quarter’s average deal size of US127 million, was made possible by 14 deals that were worth more than a billion dollars each, including three US$ 5 billion-plus deals and an additional two deals worth more than US$4 billion each. The Offshore-i reported stated since 2004, there has been only one quarter that included three $5 billion deals.

Report findings also revealed that low interest rates and cash on balance sheets have helped drive major deals, while merger and acquisitions (M&A) has proved to be a quick way to add revenue at a time when exciting market are mature or subdued, and opportunities for growth appear limited.

The Appleby report also said there was also evidence “that the rise of the mega-deal 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.”

The report concluded that 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 in the region rose to second worldwide, behind only North America, as a result of the run of mega-deals using offshore jurisdictions.

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Category: Finance, Financial Services

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  1. For the established financial industry and businesses, Cayman will remain Number 1 for quite some time. For smaller businesses, regional offshore centers will play a bigger role in the future as their infrastructures have caught up to the ones of traditional offshore centers.

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  2. Anonymous says:

    Great place to vacation. The absolute worst place to invest; unless you don't mind being defrauded (every so often).

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