Posted: 09/11/2012
The offshore M&A market was one of the few world markets to have experienced growth in the cumulative value of transactions in Q3 2012 compared to the same period last year, according to a report released today by Appleby, the world's largest provider of offshore legal, fiduciary and administration services. 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 Q3 2012.
Jersey witnesses slowdown in deal activity
Jersey saw a slight drop in the volume and value of deals involving Jersey targets between Q2 and Q3 of this year, with volumes down seven to 32 deals and value dropping 9.5% from US$1.54bn to US$1.4bn. The report notes, however, that the lower levels of deal activity are unsurprising since Q3 is often quiet as transactions dry up in the summer months.
“While the deal levels shown in the report depict a slowdown in activity in Jersey, the Appleby Jersey team has been very busy this quarter, particularly in relation to private equity backed deals across a number of sectors including financial services, care homes, clean tech and energy,” said Mark Lewis (pictured), Appleby's Practice Group Head for the Corporate & Commercial department in Jersey. He continued, “The final quarter often benefits from a surge in activity in the run-up to the year-end as demonstrated by last year's figures, and as two of the top ten rumoured transactions are Jersey based, we are confident that we will see an increase in overall deal activity in Jersey in the fourth quarter.”
The acquisition of minority stakes was the most popular deal type involving Jersey targets this quarter, with the jurisdiction completing 25 minority stake deals compared to only three acquisitions and two share buybacks. The US$750m and US$300m share buy backs deals announced by Delphi Automotive plc, the Jersey, UK-based car parts manufacturer this quarter, were particularly significant and represented 75% of Jersey's deal value in Q3.
Looking at deals involving Jersey acquirers, the report notes that Jersey has generated 24 deals worth a composite value of US$1.4bn in Q3 2012, which is consistent with Q2 levels.
Global Offshore Market
Looking at the overall offshore market, the key themes emerging from the report show that in the third quarter of 2012:
• There was a 10% drop in the volume, and a 17% drop in the value, of transactions that took place offshore compared to Q2. This fall is typical of third quarter activity, but it is not as significant as the drop between Q2 and Q3 last year.
• Values are 11% higher than they were in the same period last year, suggesting that conditions are improving year-on-year.
• In the last 10 quarters, only three periods have seen a larger average deal size than what the offshore markets experienced in Q3 – at US$78m – suggesting some robustness returning to deal sizes.
• The financial services sector continues to dominate activity in the offshore region, accounting for over a third of all deals. The second highest value sector was telecommunications, followed by manufacturing of computer, electronic and optical products.
• Cayman remains the most attractive offshore destination for investors, for the second quarter running, followed by Hong Kong, which witnessed a significant increase in the value of deals involving its companies as targets.
• Minority stakes accounted for 56% of the volume and 52% of the value spent over the period.
• The Hong Kong and BVI markets continue to produce the largest number of deals involving offshore acquirers, generating US$24.3bn and US$17.4bn respectively. Hong Kong in particular showed impressive growth, generating nearly five times what it did last quarter.
• The offshore region ranks ninth amongst world markets by deal volume and fifth for value, worth an aggregate of $33.5bn. In value terms, offshore activity comfortably outstripped that of the Middle East, Oceania, the Nordic States, Scandinavia and Eastern Europe.
“Offshore is one of the few markets to have seen growth year-on-year, and the only mature market to do so,” said Peter Bubenzer, Appleby's Bermuda-based group chairman. “We expect that offshore financial centres will continue to be strongly represented, noting that those centres in which we are located have worked hard to ensure their continuing compliance with developing international standards, so as to retain their global acceptance in this significant role as a means of efficient investment, capital deployment and risk management.”
Looking ahead to Q4 2012, Peter Bubenzer noted, “As we enter the fourth quarter, the inability of dealmakers to predict even how 2012 will round out, let alone beyond, has an obvious impact on their willingness to make investments that might ordinarily involve at least a five-year time horizon. But against this backdrop, some of the fundamentals remain strong; not least the insatiable appetite for natural resources around the globe, the continuing advances and efficiencies being realized in high tech electronics, and the rapidly developing consumer demand in many emerging markets.”