Appleby report: Total deal value across offshore jurisdictions increases

Total deal value across offshore jurisdictions increased a dramatic 79% in the first quarter of 2014 when compared to the same period last year and was the highest it has been since the end of 2012, according to a report released today by Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services. Considering the first quarter of the year is historically the quietest for dealmaking, the findings set the stage for what looks to be an active 2014.

The latest edition ofOffshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the major offshore financial centres, focuses on transactions announced during the first quarter of 2014, a period in which the firm observed a considerable increase in matter size.

“This quarter’s average transaction size of US110m across jurisdictions is the highest in the past seven years, aside from the anomalous final quarter of 2012 when a single USD56bn transaction caused average deal values to spike,” said Timothy Faries, Partner and Group Head of Corporate and Commercial in Bermuda. “The growth in average deal size is the clearest sign yet of a new depth to the market, as investors become ever-more willing to put money to work on larger transactions.”

Bermuda deal value up over previous year

In the first quarter of 2014, Bermuda was home to 96 transactions worth a combined USD10.61bn, giving an average transaction size of USD111m. The total deal value for the quarter was up 51% over the total deal value of USD7.02bn in the first quarter of last year.Substantially fuelled by Bermuda, the sector that saw the most activity across offshore jurisdictions in Q1, 2014 was financial and insurance activities.

Bermuda leads as acquirer

While the report focuses primarily on matters involving an offshore target, it also found that Bermuda was active in terms of acquisitions involving a local company acting as an acquirer. Bermuda companies acted as acquirers in 50 transactions worth US20.22bn, which marked the highest acquirer average deal value across jurisdictions, of just over $USD400m. Five of the 10 largest acquirer deals involved Bermuda-based businesses, with the USD5bn acquisition by Brookfield Property Partners of the 49% of commercial real estate developer Brookfield Office Properties that it did not already own, topping the list.

The M&A Environment

In total, there were 572 offshore deals in Q1 2014, down from the previous quarter but busier than the first quarter of 2013, which saw 528 deals. Though there were fewer deals, deal value came in at USD62.9bn—up 14% on the previous quarter and marking the fifth consecutive quarter for cumulative deal value growth.

“The most significant conclusion to be drawn from the quarter’s figures is that we’ve turned a corner away from a difficult five years following the global financial crisis,” said Cameron Adderley, Partner and Global Head of Corporate & Commercial. “The number of deals in Q1 2014 was down compared to the previous quarter as expected, but total deal value and average deal size were up, setting the stage for a busy 2014.”

There were 15 deals in excess of USD1bn in the quarter, including five worth more than USD2bn, and the deals spanned a wide range of sectors. Similar to the growth in average deal size, this spread of sector types indicates a depth returning to the market.

Key themes of Q1 2014 across jurisdictions:

There were 15 deals worth in excess of USD1bn this quarter, including five worth more than USD2bn, and these big deals spanned a wide range of sectors.

Financial services and insurance continues to be the most active sector, while retail, construction, and media and publishing also feature heavily.

The largest type of deal by both volume and value was minority stake transactions, which make up almost half of deal value this quarter.

There were 34 IPOs announced in the quarter worth a total of USD11.7bn. In the past decade, that cumulative value has only been topped on five occasions. Additionally, this quarter’s average IPO of USD345m has only been beaten once in the last decade.

The total value of deals involving an offshore acquirer was USD52bn. Only two quarters in the past four years have seen more money being invested by businesses incorporated offshore.

In this quarter, the offshore region trailed only North America, Western Europe and the Far East and Central Asia in terms of deal value. More money was spent offshore than was spent in Eastern Europe, which includes Russia, and Oceania, which includes Australia, combined.