CAYMAN REMAINS TOP OFFSHORE JURISDICTION FOR M&A IN FIRST HALF OF 2019

Offshore region as a whole records busiest first half for deals over past five years, Appleby reports

The Cayman Islands remained the busiest offshore jurisdiction for dealmaking in the first six months of 2019, recording 38% of all M&A transactions and 42% of total deal value across the offshore region, according to a report released on Wednesday by offshore law firm Appleby.

The latest edition of Offshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the major offshore financial centres, focuses on transactions announced over the first six months of 2019. While the offshore region as a whole recorded its busiest first half for M&A over the past five years, deal value was down on previous comparable periods due to a rise of minority-stake investments.

“The Cayman Islands had a particularly strong start to 2019, with the number and value of deals involving local targets far outpacing other offshore jurisdictions in the first six months of the year,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “Cayman companies were the targets in four of the 10 largest offshore deals, making the jurisdiction one of only a few to see total deal value rise when compared to the previous six months.”

While the first half of 2019 saw a decline in multi-billion megadeals across the offshore region, one significant outlier was the sale of a 2.8% stake in Cayman-incorporated e-commerce giant Alibaba by West Raptor Holdings LLC (a wholly owned subsidiary of Softbank Group Corporation) for approximately USD11 billion. Cayman was also home to one of the largest offshore deals in the manufacturing sector, the billion-dollar restructuring of Crystal International Group, a Cayman-incorporated and Hong Kong-based clothing manufacturer.

In total, Cayman recorded 570 deals, worth a cumulative USD50 billion in the first half of 2019. While the number of deals was down when compared to the second half of 2018, the dollar figure represented a 28% increase.

The M&A Environment Across Jurisdictions

There were 1,514 transactions recorded across the offshore region in the first half of 2019, accounting for USD120.4 billion in value. This value represents a drop when compared to recent half-year periods due in large part to fewer acquisitions and billion-dollar-plus deals in the first half of 2019.

“The 10 biggest offshore deals this year reflect the more cautious environment we’re seeing in 2019,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “Last year, the 10 largest deals were each worth well over four billion dollars but there have only been three of that size so far this year. These megadeals typically originate from China or the US and have been curtailed largely in the face of trade wars, risk uncertainty and national security issues.”

The five sectors that made up the bulk of inbound offshore activity were finance and insurance, manufacturing, construction, wholesale and retail trade, and information and communication.

Outbound Deal Value and Volume Slightly Ahead of Inbound Activity

While the primary focus of Offshore-i is on transactions in which offshore targets are purchased by investors, the report also examines deals in which the acquirer is based offshore. There were 1,589 of such outbound deals announced in the first half of 2019 with a total value of USD124 billion, representing numbers that were slightly ahead of inbound activity.

Offshore companies acquired targets across 62 different countries. China, the UK and United States received the most attention but there has also been considerable focus on the major Asian and Oceania countries. India, Japan, Singapore and Australia all feature heavily and there have also been large individual deals in Western Europe.

Key Findings of H1 2019:

• The total value of all offshore deals in the first half of 2019 was circa USD120 billion.

• There were 1,514 deals announced, more than South America, Africa and the Middle East combined.

• Twenty deals worth at least USD1 billion were recorded.

• There were 144 IPOs announced on six different exchanges.

• Eighty-five countries worldwide conducted offshore deals.

• There was an 82% increase in the number of Information & Communication deals from the start of last year.

• Cayman was home to the largest number of deals and total deal value in the offshore region.

• There was a drop in offshore-incorporated companies being targeted by investments financed via private equity and venture capital. There were 67 deals which is slightly below the typical six-month average total observed over the last five years.

• There were 1,589 outbound deals coming out from the offshore region, worth a combined USD124 billion.