Private equity (PE) activity represented over a quarter of the total value of offshore M&A transactions in the third quarter of 2015, putting it on pace to generate the biggest annual dollar amount the industry has seen in the past five years, according to a report released by Appleby, one of the world’s largest providers of offshore legal and administrative services.
The findings are included in a sector spotlight edition of Appleby’s Offshore-i report, which looks specifically at the transactions taking place in the PE industry in offshore markets in the year to date. The report provides analysis of private equity investment activity in the form of buyouts, and exits, whether via initial public offerings, sales to other private equity firms, or trade sales.
"With 92 private equity transactions worth a combined US$56bn in the first three quarters, this year is well on its way to surpass 2014," said Andrew Weaver, Jersey-based partner in Appleby’s corporate group. "Jersey has been a notable contributor to this activity, serving as home to the acquisition of life insurance business Guardian Holdings Europe in one of the biggest PE exits this year."
The third quarter of 2015 saw $16.1bn in PE deals across jurisdictions, representing over a quarter of the $61bn of total offshore activity.
Three sectors are dominating offshore investment activity by PE firms this year, with Information & Communication, Professional Services and Finance & Insurance all proving highly popular with buyout funds when they are shopping offshore, the report found.
"The largest of these three so-called 'offshore triangle' sectors so far this year is undoubtedly Information & Communication, which alone accounted for 12 transactions worth $12bn," said Simon Raftopoulos, Partner and Global Head of Private Equity at Appleby. "When combined with Finance & Insurance and Professional Services, these sectors account for almost two-thirds of deal volume in 2015 involving PE investment, and over 90 per cent of the value of those deals."
When it comes to exits, businesses in the Finance & Insurance sector have proved popular sales for PE firms in 2015, with seven businesses offering investment and acquisitions services changing hands during the year so far. This included the $2.5bn acquisition of Jersey-incorporated Guardian Holdings Europe by Admin Re UK.
The report noted 2015 is set to overtake the record exit total of $41.2bn set last year, with market conditions proving highly supportive to the exit value aims of the PE industry. Cash-rich corporate buyers are prepared to spend heavily on PE-owned companies, the report found.
Of the private equity exits that have so far taken place in 2015 involving offshore businesses, the majority have occurred by way of a sale.
Other key findings of the report include:
• The year-to-date total value of investments and exits for 2015 currently stands at $56bn, not far behind the 2014 annual total of $60bn. With three months still to be accounted for, this year looks likely to exceed deal values for any of the last five years.
• There were 41 investments by PE firms involving offshore targets so far this year and 55 exits. The exits typically command more value, with the average value of an investment in 2015 coming in at $490m, and the average exit worth $673m.
• There have been seven PE investments of $1bn or more involving offshore targets so far in 2015. These transactions have accounted for 79 per cent of the year’s PE deal value to date.
• The largest PE transaction announced this year involving an offshore target is the $4.3bn capital increase by Hutchison Whampoa, owner of the new parent company of telecoms groups O2 and Three Ireland, to bring in a group of co-investors to buy new shares in the business.
• The most active PE investor in the offshore market so far this year has been Temasek Holdings, the sovereign wealth fund that is owned by the Government of Singapore.
• The majority of PE investment deals taking place offshore involve minority stakes changing hands. In all, 22 of the 41 offshore private equity investments that have taken place in 2015 so far have been minority stake deals.
• In 2015, 15 IPOs have been either announced or completed involving private equity-backed companies. This represents 27 per cent of the total volume of exits.
• Of the IPOs that have occurred involving PE assets in 2015, there has been a clear shift toward the Hong Kong Stock Exchange as the capital market of choice. It was the destination for 13 of the 15 IPOs.