M&A transactions involving offshore companies and jurisdictions, a useful barometer for IFCs, fell last year from a record seen in the previous 12-month period.
Geopolitical jitters around Brexit, US elections and other events were associated with a fall in the number of merger and acquisition deals involving offshore companies last year, although activity was always going to struggle to match the record levels of 2015, according to international law firm Appleby.
In total, there were 2,895 deals targeting offshore companies in 2016, representing a total value of $234 billion, a report from the firm said. Each deal in the offshore top 10 was worth more than $2 billion, and the region saw a total of 46 transactions in 2016 each worth at least a billion dollars, double the typical total seen as recently as five years ago. The data came from the latest edition of Offshore-I, an Appleby publication.
While the report addresses offshore corporate actions, the data sheds light on the financial health of offshore centres more broadly. The Cayman Islands held on as the busiest jurisdiction for offshore transactions in 2016, recording nearly one-third of all deals and total deal value. The British Virgin Islands and Hong Kong were the standouts of the year as the only two offshore jurisdictions to see an increase in activity from 2015.
“It was clear from the start of 2016 that offshore deal activity was going to struggle to keep up with the phenomenal levels of M&A volume and value that were generated in 2015,” said Cameron Adderley, partner and global head of corporate at Appleby.
“While the outlook for 2017 remains fraught with uncertainty, many of the key drivers of a healthy deal-making environment remain. They include companies looking to supplement limited organic growth through M&A, to improve margins by realising synergies and to take advantage of the low cost of capital by making acquisitions,” he said.
Looking forward, the report points to four factors that will determine whether offshore M&A levels improve in 2017: progress between EU and UK officials on establishing a new relationship; changes to the international trade and immigration policy out of the US; China’s ability to manage its economic slowdown; and progress in the eurozone’s continued economic recovery.
The largest offshore deal announced in 2016 was the $6.3 billion purchase of Bermuda-based property and casualty insurance services company Endurance Specialty Holding, one of two insurance sector deals in the top 10. Outside of insurance, the real estate sector also featured prominently in the top 10, with the biggest deal being the $4.5 billion sale of CITIC Real Estate Co & Tuxiana Corporation, incorporated in the British Virgin Islands and China, to China Overseas Land & Investment, the report said.
The offshore region covers target companies in Bermuda, British Virgin Islands, Cayman Islands, Hong Kong, Guernsey, Jersey, Isle of Man, Mauritius and Seychelles. The date range for 2016 analysis is 1 January 2016 to 31 December 2016 inclusive.