Cayman maintains top spot for offshore deals amid general slowdown

Total deal value more than double that of next jurisdiction

Cayman-Islands registered companies remained the number one target of offshore mergers and acquisitions during the first half of this year, but offshore deals overall slowed, law firm Appleby reported in its latest Offshore-i report.

Cayman accounted for a third of all transactions and 40 percent of the total value of the offshore merger and acquisition activity.

Following a record-setting 2015, the number and value of offshore M&A deals fell in the first half of 2016 to levels seen before last year’s boom, the report said.

“Cayman remained the leader in offshore deal volume and value in the first half of this year, despite numbers being down from the highs we saw in 2015,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “Cayman was also home to four of the 10 biggest deals of the half, including three in the technology sector, which enjoyed a particularly robust start to the year.”

The largest deal targeting a Cayman company was the US$4.5 billion investment in Cayman-incorporated software publisher Xiaoju Kuaizhi by a consortium that included China Merchants Bank.

Cayman was responsible for 102 of the 115 announced IPOs involving offshore firms, with most Cayman companies listing on the Hong Kong stock exchange.

Other significant technology deals in Cayman involved a US$2 billion funding round for Cayman-incorporated Uber China and a US$2 billion share buyback by Alibaba Group Holding Ltd.

In the first six months of the year, Cayman-incorporated companies were the target in 459 transactions worth a combined $41 billion. The value represented more than double the amount of the next closest jurisdiction, the British Virgin Islands, while Hong Kong was second to Cayman in terms of deal volume with 263 transactions.

While the first six months of the year saw a slowdown in completed initial public offerings across jurisdictions, a more positive picture emerged in terms of future IPOs announced during the period, most of which involved Cayman-incorporated companies, Appleby said.

Cayman was responsible for 102 of the 115 announced IPOs involving offshore firms, with most Cayman companies listing on the Hong Kong stock exchange.

Meanwhile, the volume and value of deals involving offshore targets across jurisdictions dropped in the first half of this year compared to the second half of 2015.

“Similar to nearly all other major world regions, deal volume offshore has moved away from last year’s frantic activity and dropped back to levels seen before 2015,” said Cameron Adderley, partner and global head of Corporate at Appleby. “There has certainly been a readjustment, but not one that we feel too downbeat about.”

Appleby’s report attributed the drop-off in volume in part to the uncertainty emanating from both the impending United States presidential elections and the Brexit vote in Europe, and noted that concerns over the strength of the Chinese economy and the downturn in Latin America may further temper M&A activity globally during the remainder of 2016.

Although the number of deals was down 10 percent from the second half of 2015, the first six months of the year marked the sixth straight half-year period in which the offshore region recorded more than 1,400 deals.

The first half of the year also saw 10 separate deals each worth more than $2 billion. The technology and software sectors accounted for six of the top 10 deals of the quarter.