Appleby Reports Offshore M&A Activity for Q3 2012

| November 9, 2012 | 0 Comments

The offshore M&A market was one of the few world markets to have experienced growth in the cumulative value of transactions in Q3 2012 compared to the same period last year, according to a report released today by Appleby, the world’s largest provider of offshore legal, fiduciary and administration services. The latest edition of Offshore-i, the firm’s quarterly report which provides data and insight on merger and acquisition activity in major offshore financial centres, focuses on Q3 2012.

Guernsey continues steady growth path

Guernsey saw an increase in the volume and value of deals involving Guernsey targets between Q2 and Q3 of this year, up from 48 to 50 deals, with a 92% increase in value from US$1.17bn to US$2.25bn. Furthermore, Guernsey is the only market other than Bermuda to be the target of a greater volume of offshore deals in Q3 of this year than it was in the same quarter last year, up 3 from 47 deals in Q3 2011.

“The figures remain encouraging and continue to suggest a trend towards increasing confidence in the marketplace,” said Barney Lee, Appleby’s Practice Group Head for the Corporate & Commercial department in Guernsey. “Of the 50 deals announced in Guernsey this quarter, 43 are minority stake transactions. This is consistent with the nature of the Guernsey market rather than being indicative of anything broader.”

The financial services sector continues to dominate deal activity in Guernsey, with 41 out of the 50 deals being financial services related. Of particular significance was the US$1.4bn sale of the holding entities of Conversus Capital, the Guernsey-incorporated asset management company, to US private equity house HarbourVestPartners.

“We are cautiously optimistic that the positive growth, particularly in the financial services sector, will continue into 2013. Guernsey’s strength, in particular, as a private equity jurisdiction, is likely to encourage deal flow.” said Mr. Lee.

Looking at deals involving Guernsey acquirers, the report notes that Guernsey generated 17 deals worth a composite value of US$187m this quarter, representing an 88% increase in deal volume from Q2.

Global Offshore Market

Looking at the overall offshore market, the key themes emerging from the report show that in the third quarter of 2012:

  • There was a 10% drop in the volume, and a 17% drop in the value, of transactions that took place offshore compared to Q2. This fall is typical of third quarter activity, but it is not as significant as the drop between Q2 and Q3 last year.
  • Values are 11% higher than they were in the same period last year, suggesting that conditions are improving year-on-year.
  • In the last 10 quarters, only three periods have seen a larger average deal size than that experienced in offshore markets in Q3 – at US$78m – suggesting some robustness returning to deal sizes.
  • The financial services sector continues to dominate activity in the offshore region, accounting for over a third of all deals. The second highest value sector was telecommunications, followed by manufacturing of computer, electronic and optical products.
  • Cayman remains the most active offshore destination for investors, for the second quarter running, followed by Hong Kong, which witnessed a significant increase in the value of deals involving its companies as targets.
  • Minority stakes accounted for 56% of the volume and 52% of the value spent over the period.
  • The Hong Kong and BVI markets continue to produce the largest number of deals involving offshore acquirers, generating US$24.3bn and US$17.4bn respectively. Hong Kong in particular showed impressive growth, generating nearly five times what it did last quarter.
  • The offshore region ranks ninth amongst world markets by deal volume and fifth for value, worth an aggregate of $33.5bn. In value terms, offshore activity comfortably outstripped that of the Middle East, Oceania, the Nordic States, Scandinavia and Eastern Europe.

“Offshore is one of the few markets to have seen growth year-on-year, and the only mature market to do so,” said Peter Bubenzer, Appleby’s Bermuda-based group chairman. “We expect that offshore financial centres will continue to be strongly represented, noting that those centres in which we are located have worked hard to ensure their continuing compliance with developing international standards, so as to retain their global acceptance in this significant role as a means of efficient investment, capital deployment and risk management.”

Looking ahead to Q4 2012, Peter Bubenzer noted “As we enter the fourth quarter, the inability of dealmakers to predict even how 2012 will round out, let alone beyond, has an obvious impact on their willingness to make investments that might ordinarily involve at least a five-year time horizon. But against this backdrop, some of the fundamentals remain strong; not least the insatiable appetite for natural resources around the globe, the continuing advances and efficiencies being realized in high tech electronics, and the rapidly developing consumer demand in many emerging markets.”

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Category: Finance & Business

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