Offshore mergers and acquisitions activity increased at twice the global rate in the last quarter, according to a report released by offshore law firm Appleby.
The latest edition of Offshore-I on M&A transactions in offshore financial centres noted the Cayman Islands took the top spot as the most popular destination for investors doing deals involving offshore targets. The Cayman Islands had the highest aggregate deal value, US$19bn of US$37bn, representing 51 per cent of the total deal value of all nine offshore markets included in the report.
In addition, the Cayman Islands saw the greatest number of deals in the second quarter of 2012 of all offshore jurisdictions, with 104 of 447 total deals, representing nearly a quarter (23 per cent) of the total number of offshore deals this quarter.
Of the Top 20 deals in Q2, 2012 eight were in the Cayman Islands, including the top four deals and eight of the top 20 rumored deals are located in the Cayman Islands as well, the report said.
The top deal was a US$7.1bn deal announced by the Alibaba Group, a global e-commerce group based in China, to buy back 20 per cent of its shares. The second-largest deal was a more than US$2.35bn acquisition by Alibaba.
As a result of these transactions the Cayman Islands experienced significant growth in the second quarter with deal value and volume up 323 per cent and 17 per cent respectively from the preceding three months. The number of transactions grew from 89 to 104 and the aggregate deal value increased to over US$19bn from US$4.5bn.
The second quarter 2012 deal value was the highest in Cayman since the fourth quarter of 2010 with a reported deal value of nearly US$22.7bn and 222 reported deals.
“The Cayman Islands is the top location for doing deals involving offshore targets, in deal value and number of deals,” said Stephen James, global head of Banking and Asset Finance based in Appleby’s Cayman office. “Market consolidation continues apace, driving an increase in deal value and deal size,” he added.
Overall the number of deals involving offshore targets was down slightly by 4 per cent from the previous quarter and down 34% from the same quarter in 2011, an indication of continuing market consolidation exhibited by fewer, larger deals, the report said.
The financial services sectors continues to dominate the deal activity. Based on the top 20 deals of the quarter, as well as the largest pending or rumoured transactions, confidence is highest in Asian markets and in oil and gas, minerals and mining. The combined energy and natural resources sector continues to generate bullish deal flow, accounting for six of the top 20 deals of the quarter.
“This quarter we can observe a certain robustness returning at the larger deal end of the transactional landscape,” said Peter Bubenzer, Appleby’s Bermuda-based group chairman. “Financial sponsors find themselves sitting on cash that needs to be invested, and corporate balance sheets look strong and ripe for spending on the right deals in the right places,” he added.