Cayman remains offshore M&A leader

The Cayman Islands maintained its position as the most popular offshore jurisdiction for dealmaking in the third quarter of 2013.

Cayman saw 20 percent more mergers and acquisitions in the third quarter 2013 and an increase of 32 percent in the value of transactions over the previous quarter.

The Offshore-i report by law firm Appleby was cautiously optimistic about a return of investor confidence, noting an even distribution of deals, an increase in the number of acquisitions and a shift of investment value from minority to majority stake purchases.

“The Cayman Islands accounted for 39 percent of total offshore deal value in the third quarter of 2013 and its attractiveness continues to grow,” said Bryan Hunter, managing partner of Appleby’s Cayman Islands office. “Cayman has consistently recorded the most deals of the offshore markets this year, and we’re confident it will remain the top offshore jurisdiction for dealmakers around the globe.”

Cayman accounted for 26 percent of all the deals done and 39 percent of the total deal value, with 140 of the 538 offshore deals and US$13.5 billion of the $34.5 billion deal value. The average deal size in the Cayman Islands in the third quarter was US$96.3 million, well above the overall average value of $64 million.

‘Deep and sophisticated deals’

“Cayman continues to be the most attractive jurisdiction for dealmaking and we continue to see deep and sophisticated deals involving Cayman more so than any other offshore market examined in our third quarter report,” said Simon Raftopoulos, a Cayman-based corporate partner at Appleby. “Cayman is also where the largest transactions of the third quarter occurred.”

Cayman was home to the three largest offshore transactions and four of the top five overall. In the quarter’s biggest deal, Baidu, China’s largest search engine, revealed plans to acquire Cayman-incorporated mobile app distribution company 91 Wireless Websoft from NetDragon for $1.9 billion. In the second-largest deal, Chinese semiconductor company Spreadtrum Communications, which is Cayman-incorporated, agreed to be acquired by Tsinghua Holdings for $1.8 billion. A third Cayman-incorporated target rounds out the top three deals with British manufacturing business Edwards Group the subject of an acquisition by Sweden’s Atlas Copco for $1.6 billion.

In private equity deals, the Cayman Islands attracted the biggest institutional buyout of this quarter, with Blackstone Group paying $500 million for Cayman Islands banking services software developer Pactera Technology. In total, the third quarter saw three institutional buyouts with a combined worth of $834 million. The return of these deals – the most common private equity structure for mid to large transactions – marks a positive step for the private equity industry, where offshore activity in recent years has been heavily focused on smaller management buyout deals.

Offshore transactional markets stabilize

Across offshore markets, the third quarter of 2013 has seen the number and value of deals stay consistent with both the first and second quarter, indicating transactional activity is continuing to stabilize.

Cameron Adderley, partner and global head of Appleby’s Corporate group, said, “Offshore markets, which represent critical links in the global supply chain of trade and investment flows worldwide, are exhibiting signs of robustness after several years of volatility.

“That is a development we have been looking out for since we began our Offshore-i series, and we view it as a critical requirement of a sustainable macro-economic recovery.”

Offshore markets ranked fifth globally in terms of cumulative deal value in the third quarter, ahead of Africa, the Middle East, Oceania and South and Central America.

Only North America, and South and Central America saw larger average deal sizes than the offshore markets.

There were six deals worth over US$1 billion this quarter. The top 10 deals make up just over a third of the total value of the quarter.

Minority stake deals continue to be the most prominent, but account for less total deal value than in the same quarter of last year.

Acquisition activity led by companies incorporated offshore increased in volume but dropped in value. There were 512 deals with a cumulative value of $26.8 billion, up 14 percent in terms of volume and down 21 percent by value.

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