Cayman Islands continues to dominate offshore M&As

Cumulative value of US$20 billion

The majority of offshore mergers and acquisitions once again involved Cayman Islands registered entities in the first quarter of 2014, accounting for about a third of the volume and value of the deals. 

Cayman was the venue of 164 transactions with a cumulative value of US$20.7 billion, according to a report by law and fiduciary firm Appleby. 

The total deal value across all offshore jurisdictions increased significantly by 79 percent during the period compared to the first quarter of 2013, the latest edition of Offshore-I found. 

“First quarter deal value across jurisdictions was the highest it’s been since the end of 2012 and represents the fifth consecutive three-month period in which offshore M&A deal values have increased,” said Simon Raftopoulos, a Cayman-based partner and member of the firm’s corporate finance and insurance teams. “There were 15 deals worth more than US$1 billion in the quarter, which is the highest number we have seen, and the top five deals, two of which occurred in Cayman, were each worth in excess of US$2 billion.” 

In the first quarter of this year, Cayman deals were valued $2 billion higher in total than those completed in the previous three months, despite 30 fewer deals than last quarter. When compared to the first quarter of 2013, the number of transactions involving Cayman increased 19 percent and total deal value was 66 percent higher.  

Among the quarter’s 10 largest transactions was the announced $3 billion acquisition of Giant Interactive Group, the Chinese headquartered and Cayman-incorporated online games developer, by a group of investors that includes Baring Private Equity Partners Asia. Other noteworthy deals included the Hong Kong Stock Exchange IPO of HK Electric Investments, a Cayman Islands-incorporated investment trust services business, for $3.1 billion, and the planned IPO of Cayman-registered JD.com, one of the largest online direct sales companies in China, expected to be around $1.5 billion. 

Despite the drop in transactions, Cayman remained well ahead of its nearest offshore comparators by volume of deals, including BVI, which had 107 deals, and Bermuda, which announced 96 deals during the period. 

In total, there were 572 offshore deals in the first quarter, down from the previous quarter but busier than the first quarter of 2013, which saw 528 deals. 

Total deal value, in turn, was up 14 percent at $62.9 billion on the previous quarter, producing the fifth quarter of cumulative deal value growth. 

This quarter’s average deal size of $110 million was the highest in the past seven years, with the exception of the anomalous final quarter of 2012, when a single $56 billion transaction caused average deal values to spike.  

The growth in average deal size is the clearest sign yet of a new depth to the market, as investors become ever-more willing to put money to work on larger transactions, the report said.  

Moreover, total deal value in Q1 2014 has been topped only twice since the beginning of 2008. 

“The most significant conclusion to be drawn from the quarter’s figures is that we’ve turned a corner away from a difficult five years following the global financial crisis,” said Cameron Adderley, Appleby partner and global head of Corporate & Commercial. “The number of deals in Q1 2014 was down compared to the previous quarter as expected, but total deal value and average deal size were up, setting the stage for a busy 2014.” 

In terms of industries, financial services and insurance continues to be the most active sector, while retail, construction, and media and publishing also featured heavily. 

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