Offshore private equity deals set to reach five-year high

Private equity deals accounted for more than a quarter of the total value of offshore mergers and acquisitions in the third quarter of 2015 and are set to reach the highest total dollar value in five years, according to a report by Appleby.

The Offshore-I report, which looks at private equity transactions in offshore markets for the year to date, showed US$16.1 billion in private equity deals amid $61 billion total offshore activity.

“So far this year, the offshore region has witnessed 92 private equity transactions worth a combined US$56 billion, and is well on its way to surpass 2014,” said Simon Raftopoulos, Cayman-based partner and global group head of private equity at Appleby. “The total sum of 2015 investments is likely to end up topping anything seen in the previous five years, with more private equity money chasing a limited supply of companies resulting in even higher valuations.”

Private equity firms were particularly active in the information and communications industry, as well as the professional services and finance and insurance sectors, the report found.

“The largest of these three so-called offshore triangle sectors so far this year is undoubtedly information and communication, which alone accounted for 12 transactions worth $12 billion,” Mr. Raftopoulos said. “When combined with finance and insurance and professional services, these sectors account for almost two-thirds of deal volume in 2015 involving PE investment, and over 90 percent of the value of those deals.”

The finance and insurance sector saw the most sales by private equity firms, with of seven businesses offering investment and acquisitions services changing hands during the year so far.

Overall, the report anticipates offshore private equity deals this year will exceed the record exit total of $41.2 billion set last year, as market conditions support the exit value target of the PE industry and cash-rich corporate buyers are prepared to spend heavily on private equity owned companies.

Cayman Islands-incorporated companies have been the principal target of private equity investment offshore so far in 2015, with 14 deals worth an average of more than $1 billion each. In total, Cayman transactions accounted for a third of deal volume and a cumulative value of $15 billion, or nearly 75 percent of total deal value spent offshore by private equity firms in the first nine months of the year.

Bermuda trailed Cayman with six deals worth a total of $3.3 billion, or 16 percent of all deal value. Mauritius accounted for 10 deals in 2015, or nearly one in four private equity transactions. While these transactions were comparatively small in value, totaling $273 million, they highlight the growing interest of private equity firms in Africa, the report said. Mauritius and the Seychelles are the preferred offshore structuring jurisdictions for the continent.

The majority of deals involving private equity firms were minority stake acquisitions and sales. Fifteen IPOs by private equity-backed firms have either been announced or completed in 2015. Most of the listings, 13 of 15, have taken place on the Hong Kong Stock Exchange.