Offshore Deal Activity Stabilizes, IPO Pipeline Surges

New York, November 6, 2013  – Offshore deal flow in the third quarter of 2013 kept pace with the first two quarters of the year, providing continued evidence that these markets are stabilizing after years of uncertainty, according to a report released today by Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services.  The report also found that the pipeline of planned IPOs is more crowded than it has been in recent quarters.

A total of 538 deals were completed with a value of $34.5 billion during the third quarter of 2013, according to 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 centers. The second quarter of the year saw 523 deals with a cumulative value of $35.6 billion, meaning volume is up 3 percent and value down 3 percent.

“The offshore markets, which represent critical links in the global supply chain of trade and investment flows worldwide, are exhibiting signs of robustness after several years of volatility,” said Cameron Adderley, Partner & Global Head of Appleby’s Corporate & Commercial group. “That is a development we have been looking out for since we began our Offshore-I series, and we view it as a critical requirement of a sustainable macro-economic recovery.”

The quarter saw 11 IPOs completed offshore. While this number is down from the 17 initial public offerings completed in the second quarter, the number of planned IPOs is up from 22 in the second quarter to 27 in Q3.

Effects of U.S. government shutdown unknown

The report found that while the U.S. economy has largely been positive this year, it is nonetheless contributing to the global uncertainty that surrounds the offshore markets.

“The other major economic regions in which our clients operate are critical to the offshore revival, and whilst the signs from the United States economy have been broadly positive throughout 2013, the budgetary impasse that caused the shutdown of the federal government in October may yet seriously affect confidence and deal flow around the world,” said Appleby Chairman Frances Woo.

The report cites a number of other factors that have added to the unpredictability of the global markets, including tensions that have surfaced over the handling of the Syrian conflict, and the stock markets and currencies, particularly in Asia, that remain under pressure amid fears that the Federal Reserve might taper its quantitative easing program. Additionally, the Eurozone, though strengthening, still faces major sovereign debt challenges, particularly in the Southern European states.

"The evidence provided by the Q3 figures means that we continue to be cautiously upbeat about the prospects for our offshore region and therefore the wider economic landscape,” Woo said. “However, we do not shy away from recognizing that we are entirely interconnected to the global economy.”

Additional key findings of the Q3 report include:

·         In Q3 2013, Cayman Islands led the nine offshore jurisdictions examined in the report in both deal volume and value. The jurisdiction accounted for 26 percent of all the deals done and 39 percent of the total deal value, with 140 of the 538 offshore deals and $13.5 billion of the $34.5 billion deal value.

·         Bermuda was home to the second largest number of deals.

·         There were six deals worth over $1 billion this quarter. The top 10 deals make up just over a third of the total value of the quarter, a consistent ratio for 2013 and a positive sign of depth returning to the markets.

·         Deals are taking place across the value chain and with some consistency of distribution.

·         Minority stake deals continue to be the most prominent, but account for less total deal value than in the same quarter of last year. A year ago, in Q3 2012, 57 percent of dollars spent went into minority stake deals, but today that spending has halved.

·         Acquisition activity led by companies incorporated offshore increased in volume but dropped in value; there were 512 deals with a cumulative value of $26.8 billion, up 14 percent in terms of volume and down 21 percent by value.

·         By average deal size the offshore region ranks third globally, behind only North America and South and Central America in Q3.