Appleby, the world’s largest provider of offshore legal, fiduciary and administration services, today released the inaugural edition of Offshore-i, which provides quarterly data and insight on merger and acquisition activity in major offshore financial centers. The report looks at M&A activity for the first quarter of 2012, providing sector analysis and expert insight on deal types and geographic trends.

The report highlighted the Cayman Islands as one of the most popular destinations for investors doing deals involving offshore targets.

The key themes emerging from the report show:

• Deal values in Q1 2012 increased by 25% from the previous quarter’s USD 23.2bn to USD 30.9bn.
• The most popular destinations for investors doing deals involving offshore targets are the Cayman Islands and Hong Kong.
• The number of transactions in the offshore sector in Q1 2012 amounted to 412. While deal volumes were lower than the same period a year ago, there is still a reasonable amount of activity going on across the offshore world.
• The banking, insurance and financial sector continues to dominate offshore activity, well ahead of its nearest comparator, wholesaling.
• Most of the deals in the quarter were minority stake transactions rather than full takeovers.

In Q1 2012, transaction values were significantly higher, with total value up 25% on the preceding three months. Conversely, the volume of deals taking place offshore was down 24% on the last quarter of 2011 and, was 26% lower than the same period of last year, revealing that corporate transaction levels continue to be stagnant, according to the report.

“It will be interesting to see if this positive increase in values continues into the rest of 2012,” said Stephen James, Partner in Cayman and Appleby’s Global Head of Banking and Asset Finance. “While many challenges are ahead, there are ongoing signs of real buoyancy in Asian and other emerging markets.”

The Cayman Islands, along with Hong Kong, were the two most popular destinations for investors doing deals involving offshore targets, both of them driven by the continuing strength and attractiveness of the Asian markets. The report found in Q1 there were marginally more acquisitions involving Hong Kong targets than those based in the Cayman Islands, 89 deals versus 87, a switch when compared to the 142 companies acquired in the Cayman Islands during the same period last year compared with 126 in Hong Kong during that time.

The increase in Hong Kong deals reflects the current macroeconomic environment, with Asia providing the source of a significant amount of deal activity, the report notes. Many of the deals going through Cayman in Q1 2012 are likely to have had some Asian involvement as well, given that Cayman has emerged as a preferred jurisdiction for companies doing transactions across the Asia Pacific marketplace.

Mauritius meanwhile, emerged as the offshore economy experiencing the greatest growth in activity, with the number of deals involving targets there jumping from six to 12 between Q1 2011 and Q1 2012.

Offshore transactions remain dominated by the banking, insurance and financial services sector, which has been consistently ahead of other areas for some time. Mining and extraction and other natural resources sectors are also experiencing activity, with the demand for natural resources coming out of China in particular fuelling dealflow.

The report found minority stakes are changing hands more often than entire businesses, driven largely by the economic uncertainty that has presented challenges for dealmakers. Additionally, the number of IPOs hit a significant low (down from 34 in Q4 2011 to nine in Q1 2012). However, planned IPOs are on the rise, up from seven in the last quarter to 16, suggesting positive news for the pipeline.

Though deals are down in the first three months of this year when compared to last quarter, the report notes that Q2 is usually more robust, pointing toward a busier few months to follow.