M&A activity could heat up for Bermuda

Bermuda continued to attract dealmakers from around the world.

Timothy Faries, Appleby’s group head of corporate and commercial in Bermuda, made that announcement yesterday as his company released its latest edition of Offshore-I yesterday, which report provides data and insight on the merger and acquisition market in major offshore financial centres.

There were 448 offshore deals reported and Bermuda was involved in 90 of them, second only behind Cayman’s 102. Hong Kong was third with 73 followed by British Virgin Islands (71), and Guernsey (55).

The first quarter saw offshore centres record the lowest number of deals since the first quarter of 2008. Bermuda was not immune to the decline as the number of deals was down 5.5 per cent, but that was lower than the 10 per cent decrease in deals from all offshore jurisdictions and considerably better than the global average drop of 20 per cent, 

Mr Faries said: “In the first few months of the year, Bermuda again proved to be a resilient market that continues to attract dealmakers from around the world.

“While we did witness a drop in deal value and volume, it was smaller both compared to other offshore jurisdictions and markets around the world. It is typical for the first three months of the year to lag behind subsequent quarters and we are confident we will see these numbers strengthen in the second quarter of 2013.”

Bermuda’s largest deal was the USD568m acquisition of heavy sea transportation engineering and installation services holding company Dockwise by Boskalis Holding B.V., a subsidiary of Royal Boskalis Westminster N.V. 

Appleby acted as counsel in two of the three largest Bermuda-based transactions in Q1, including Dockwise, which was the eighth biggest deal of the quarter in the offshore market. In terms of total deal value for the first quarter of 2013, Bermuda’s USD $5.2bn represents a roughly 48 percent drop from the previous quarter and a roughly 46 percent drop from the first quarter of 2012.

The full report stated: “There were considerably more deals involving Cayman Islands-incorporated targets than those based in other offshore markets, with the jurisdiction accounting for 102 of the 448 transactions, or 23 per cent. 

“By value the dominance of Cayman is even more stark in this quarter, with the islands seeing an aggregate deal value of USD11.9bn, some 43 per cent of the total USD27.9bn. 

“This is in contrast to Q4 2012, when Cayman dominated by volume but ranked third by value, behind the BVI and Hong Kong respectively. Likewise, when we compare to the same period a year ago, Cayman ranked first by volume but third by value, where Hong Kong once again dominated.

“Interestingly the volume of deals going into Cayman in Q1 2013 is almost the same as it was a year ago, but the value of those transactions has almost doubled, from USD6bn to USD11.9bn. Against Q1 2012, Hong Kong targets have seen a decline in deal volumes from 104 to 73 transactions, and by value the drop has been from USD11.1bn to USD5.3bn. The financial services and insurance industry dominated M&A activity in the first quarter with 135 deals, nearly double the 73 transactions in the professional, scientific and technical activities sector.

The first quarter report shows anecdotal evidence that there may be a potential increase in M&A activity for Bermuda in the near future with a number of deals in the insurance and energy sectors. 

“The fortunes of the offshore world are, of course, entirely entwined with those of the major economic regions in which many of our clients operate, and despite positive economic signs emerging from the United States and a period of stability expected in China now that its political uncertainties have been addressed, global dealmakers remain nervous,” said Cameron Adderley, global head of Appleby’s Corporate & Commercial department. “We are cautiously optimistic that history will pick out 2013 as the year in which the international economy entered a gradual upward trajectory, but it did not begin in the first quarter.”

Frances Woo, Appleby’s Chairman said, “In all of our jurisdictions, despite conservatism still being the prevailing feature, we are seeing an increasing acceptance of a new reality when it comes to growth prospects, liquidity challenges and pricing levels. Experience tells us that Q2 is usually more robust than Q1 and we expect that to be the case again this year. Indeed we hope to see volumes and values gradually strengthening in the months ahead.”.