The Cayman Islands remained the top jurisdiction for offshore deals last year. Cayman accounted for 31 percent of all offshore merger and acquisition transactions and 26 percent of total deal value in 2018, according to a report released by offshore law firm Appleby.
In all offshore centers monitored by the latest Offshore-i report, overall deal value increased by more than US$100 billion to $344 billion compared to 2017, in 2,781 deals targeting offshore companies.
“Cayman continued to lead the way in overall M&A activity in 2018, driven in part by a particularly active technology sector,” said Simon Raftopoulos, partner and group head of Appleby’s Private Equity practice in the Cayman Islands. “Despite a slight dip in the total number of deals, Cayman saw a rise in both overall deal value and average deal size.”
The cumulative deal value involving Cayman reached $89.7 billion last year as the jurisdiction saw three of the year’s 10 largest offshore deals. With 867 deals, Cayman was the busiest offshore center for deal making, followed by Hong Kong (709 deals), the British Virgin Islands (504 deals) and Bermuda (307 deals).
Acquisitions have become increasingly popular over the last two years, compared to taking a minority stake in a company or releasing more shares to investors, the report finds. It now makes up nearly half of all offshore M&A activity.
“Investing companies are no longer content to just take a seat on the board, but want full control of an asset in order to gain a competitive advantage over rivals,” said Cameron Adderley, partner and global head of Corporate at Appleby. “This drive to do strategic deals is likely to continue, providing finance remains readily available, interest rate rises predictable and markets stable. Gaining access to transformational technologies also remains a big incentive across almost every sector.”
Cayman-incorporated companies made up the vast majority of offshore businesses that completed an initial public offering last year. Of 349 offshore companies in 60 industries, a record 196 completed their listing in 2018. Cayman companies were behind 174 of these completed IPOs.
“Investor confidence, large pools of liquidity, strong valuations and low interest rates have offset recent stock market turbulence, creating a very strong year for IPOs in the offshore region,” Mr. Adderley said. “We have seen a lot of activity from wholesale traders looking to raise extra working capital, and construction companies launching IPOs in order to invest in ongoing projects.”
Typically, offshore IPOs take place on exchanges in the U.S., London or Hong Kong, with Hong Kong an especially popular choice among Cayman companies.