Appleby Reports Offshore M&A Activity For Q2
In this report Appleby analyse the transactions that took place in the second quarter of 2013 across all of the key offshore jurisdictions around the globe. Never before has it been as clear to us that the international financial centres in which we operate play a crucial role as links in the global supply chain, supporting trade and investment flows worldwide. When it comes to the value of deals completed in the second three months of the year, at USD31.6bn the offshore region ranks sixth globally. During Q2 2013, businesses incorporated within offshore borders were the subject of transactions worth more than those into Oceania and Africa combined.
The second quarter of 2013 presents a positive picture. The number of deals done, and the value of those deals, remained broadly flat as against Q1, giving room for hope that there may be some stabilisation of transactional activity levels after several years of volatility. In the offshore markets we see a figure of about 500 deals per quarter emerging as a norm for deal volumes, and with our data recording 493 deals in Q2, as against 491 in Q1, we feel comfortable asserting that business confidence is now stabilizing.
The latest edition of Offshore-i, the firm’s quarterly report, which provides data and insight on merger and acquisition activity in major offshore financial centres, focuses on the second quarter of 2013. The report presents a relatively positive picture, suggesting that there may be some stabilisation of transactional activity levels after the volatility of the last few years.
In its latest Offshore-I report, Appleby has revealed a positive offshore market outlook with business confidence stabilising after several volatile years. The second quarter of 2013 has shown positive signs of a gradual return to more stable transactional activity following several years of volatility. The report also indicates positive offshore M&A activity and a surge in IPOs for quarter two (Q2) of 2013.
Offshore-I provides data and insight on merger and acquisition activity in major offshore financial centres. The latest edition focuses on Q2 2013.
Cameron Adderley, global head of Appleby’s corporate and commercial department, said: ‘The number of deals has started to form a pattern averaging out around 500 per quarter in five of the last six quarters and so far this year we have seen 493 deals in Q2 and 491 in Q1. We feel comfortable asserting that business confidence is at last returning to the markets.
‘At $64m for Q2, average deal size is higher than it has been for five of the last eight years. The offshore region average is also higher than all other regions except for North America at $119m and Central and South America at $109m.
‘When we look at the contribution of the top 10 offshore deals to overall activity Q2, we see that they accounted for just a third of the cumulative deal value overall, as they did in Q1. We believe that this gives further reason for optimism as values for past quarters have been distorted by one-off mega deals. We can now see genuine substance returning to the mid-market and activity returning across the spectrum of business sizes. Transaction sizes show tangible signs of settling at pre-boom levels, on a par with 2006 data, when $61m was spent on the average transaction.’
Frances Woo, global chairman at Appleby, said: ‘When we look to gauge the relative strength of the offshore markets as compared with other major world regions, this quarter we find these numbers are encouraging with the offshore markets now ranking sixth globally in terms of cumulative deal value, only just behind South and Central America. The offshore market is more active than Oceania, Africa and the Middle East. And, when we look at average deal size, we again find a source of positive news; here the offshore region ranks third globally, behind only North America and South and Central America in Q2 2013.’Global Offshore Market: Q2 2013
The key themes emerging from the report show that in the second quarter of 2013:
There were 493 deals involving offshore targets completed with an aggregate value of USD31.6bn, putting the quarter slightly ahead of Q1 2013.
The average offshore deal size was USD64m for Q1 2013, the same as for 2013 to date. If this is maintained or improved, to the year end, deal sizes in 2013 would be greater than they have been in at least five of the last eight years.
By average deal size the offshore region ranks 3rd globally, behind North America and Central and South America in Q2 2013.
Acquisition activity led by companies incorporated offshore rebounded in Q2 2013 after a weaker first quarter, and there were 426 deals with a cumulative value of USD34bn, up 11% in terms of volume and 29% by value.
In Q2 there were only three deals announced valued in excess of USD1bn. Instead the majority of money was spent in the mid-market on transactions valued at between USD200-700m. We see this strengthening of the mid-market as a crucial step towards recovery.
Finance and insurance deals continued to drive the offshore M&A markets with 168 deals with a combined value of USD10bn, up quite considerably on Q1 2013, when there were 147 deals in the sector worth USD6.5bn.
The most popular deal type was the minority stake transaction, of which there were 295 that contributed USD11.5bn to the cumulative deal value for the quarter.
Hong Kong acquirers spent the most money in Q2 2013, with an aggregate deal value of USD13.7bn that represented 40% of total spending by offshore acquirers.
Initial Public Offering activity is looking increasingly bullish, with both the volume and value of IPOs up considerably in Q2 2013 with 17 deals and a cumulative value of USD2.4bn. Q2 2013 was the best quarter since 2011 for IPOs and planned IPOs, with 39 deals in total worth USD4.1bn.
Strength of the offshore market globally
In comparison to other major world regions, the offshore world has seen its global position remain at sixth in terms of cumulative deal value, with more money spent on offshore registered businesses than on those in Africa and the Middle East combined. The offshore market has also seen more deal volume than Central and South America, Africa or the Middle East.
In terms of average deal size in 2013, the offshore market is ranked 3rd globally, behind only North America and Central and South America, and with an average deal size of USD64m. This puts the offshore sector above Western Europe [USD60m] and the Far East and Central Asia [USD36m]. The offshore markets accounted for 3% [USD31.6bn] of all global economic deal values which stood at a total of USD1.1tr for the second quarter of 2013.
“These numbers are encouraging,” says Cameron Adderley, “the offshore market is definitely gearing up for an increasingly active period. ”
For more on this story and to receive the whole report go to:
Related story:
Guernsey & Bermuda keep the faith
From FTSE Global Markets
In their latest survey on company incorporation activity in the major offshore markets, Appleby, the offshore legal, fiduciary and administration services provider, reports a decrease of 3.6% in the second half of 2012, compared with the first half of the year, indicating the impact of uncertain global economic conditions across the majority of the offshore markets.
Appleby’s latest On the Register Report analyses incorporations in offshore centres such as the British Virgin Islands (BVI), Cayman and the Channel Islands, comparing with financial centres such as the UK and Hong Kong. Appleby says there are grounds for optimism in 2013 as Bermuda reports a 7% increase and the comparative market of Hong Kong also shows an increase in new company registrations. “There are signs that 2013 will be a watershed year in terms of seeing a universal return to pre-2009 activity levels across the offshore jurisdictions,” says Farah Ballands, partner and global head of fiduciary & administration services at Appleby.
BVI continues to dominate the volume of new company incorporations offshore. The trend in the formation of companies in the information, technology, natural resources, mining and extraction sectors continues, with heightened activity in telecommunications and global project and infrastructure work in the robust markets of Africa, Canada, Latin America, Mongolia and Australia all of which is driving demand for BVI vehicles.
Overall growth rates in new company incorporations for the majority of jurisdictions stayed at minimal levels last year, which proved to be a year of consolidation following large increases in new incorporations between 2009 and 2011. “Continued uncertainty in some markets and the shift in focus from China/Asia to Africa for jurisdictions like Mauritius and the Seychelles are preventing a speedy return to the numbers of company formations recorded prior to the global economic crisis,” says Ballands. In consequence, “it’s hard to be surprised at the company registrations barometer struggling to improve quickly but we are seeing growth in some markets,” adds Ballands.
The story is similar for the total number of active companies, with most jurisdictions showing little movement from the previous year as new company formations cancelled out the numbers leaving the registries. Hong Kong saw a 9% increase in the total number of active registered companies, with the local register there breaking through the one million mark for the first time.
The Mauritius and Cayman registries are steadily returning to their pre-recession peaks experiencing a 3% and 1% rise respectively. The report finds that overall volumes of new offshore companies being registered were 11% lower in the third and fourth quarters of last year (Q3/Q4 2012) than the preceding six months. After a busy first half of the year, jurisdictions including the Isle of Man, Mauritius, Cayman and the British Virgin Islands were approximately 10% down in the latter half.
BVI dominates offshore new company registration activity by volume, maintaining a six-fold lead ahead of its nearest comparator, the Cayman Islands. Year on year, Guernsey is the only offshore jurisdiction revealing growth in new company registration activity with a 1% increase between 2011 and 2012, while Mauritius is the offshore economy witnessing the greatest growth rate in total number of companies on its register, with a 3% increase between 2011-2012.
The UK and Hong Kong in comparison continue to show signs of recovery. Hong Kong was the only jurisdiction indicating real growth between Q1/Q2 2012 and Q3/Q4 with a 7% increase in registrations. Both Hong Kong and the UK are back to registration levels well above those recorded in 2009.
Guernsey’s 27 AIFMD agreements: The Guernsey Financial Services Commission (GFSC) has signed bilateral cooperation agreements with 27 securities regulators from the European Union (EU) and the wider European Economic Area (EEA), including the United Kingdom (UK), France and Germany.
The cooperation agreements provide a set of arrangements for the on-going supervision of alternative investment funds, including hedge funds, private equity and real estate funds.
Non-EU jurisdictions, such as Guernsey, are considered ‘third countries’ and are not required to implement AIFMD. However, for third country AIFMs to continue accessing EU markets post 22nd July 2013, their home jurisdiction must either apply measures equivalent to AIFMD or adopt provisions which will enable them to continue to market into the EU through existing National Private Placement (NPP) regimes, which will remain until at least 2015 and potentially to 2018.
Consultation is expected shortly on the full AIFMD equivalent opt-in rules which Guernsey will introduce in due course. These rules should allow bilateral marketing of an AIF product to certain EU Member States prior to the implementation of a third country passport regime. The European Commission is expected to implement the full passporting regime for non-EU managers of alternative funds (AIFMs) in July 2015. However, in the meantime, Guernsey managers will continue to be able to access the EU markets under the NPP regimes as a result of the cooperation agreements that have been signed.
For more on this story go to:
http://www.ftseglobalmarkets.com/issues/issue-72-september-2013/guernsey-bermuda-keep-the-faith.html
