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Offshore-iANNUAL RE VIE W 2017 SUMMARY
OFFSHORE M&A INSIGHTS AND DEAL INTELLIGENCE
Offshore-i Annual Review 2017 2
USD227bn2,77141326USD40bn97
spent on Offshore targets, USD8bn more than last year
deals announced so far; similar to Spain and to India
deals worth at least USD1bn, including three worth over USD5bn
IPOs announced; a record-breaking total
spent by Private Equity to finance Offshore purchases
countries have conducted Offshore deals worldwide this year
Cameron Adderley Partner & Global Head of Corporate
CONTENTS
The M&A Environment 3
Sector Analysis 6
Initial Public Offerings 7
Geographic Trends 8
Acquirer Deals 9
The Private Equity Environment 10
Contact Us 11
The Offshore region enjoyed a busy year in 2017. Worldwide, deal activity fell just short of the record-breaking figures from previous years. While the circumstances surrounding the timing and background to deal making is wide and varied, political developments in Washington and Europe have undoubtedly caused consternation. In China, capital controls were introduced by their foreign exchange regulator at the end of 2016 followed by a government-directed assessment of any cross-border financing arrangements.
However, the spate of ongoing positive economic news being reported in most regions of the world, along with improved oil prices, has provided a bedrock of confidence. European elections, tax reforms in the US and Brexit negotiations with the UK have not led to the economic fallout feared by some. In China, the renminbi has strengthened and strategic, prudent deals continue to be approved.
The opportunities to expand internationally to fill product and production line gaps and to acquire technology, remain tempting and accessible. Meanwhile, worldwide GDP is still low, and achieving robust growth is likely to require M&A commitment.
In the midst of all this, the Offshore region has maintained a high level of deal activity, with inbound and outbound volume outpacing the previous year, while IPOs and Private Equity deals have been especially prevalent.
Please don’t hesitate to get in touch with your usual Appleby contact should you wish to discuss any of the issues highlighted in this report.
OFFSHORE 2017 IN NUMBERS
Offshore-i Annual Review 2017 3
The M&A Environment
WORLD REGIONS IN 2017
Global activity has declined year-on-year, but underneath this headline, several regions are experiencing positive growth. Africa proved to be the biggest mover as deal making there rocketed to USD59bn in 2017, thanks mostly to a series of large mining deals.
In South & Central America, the economic slowdown and the economic and political turbulence currently facing the region has made some companies affordable targets, and deal activity has picked up after a steep decline last year.
Elsewhere, the uncertainty around China’s restrictions on capital outflows has led to a sharp decline in Chinese outbound activity. The drop was not only expected but wanted, the Chinese regulators having become alarmed at the number of overseas deals that made questionable business sense, and took up large chucks of the country’s foreign reserves.
The US remained the highest-value region, with USD1.6tn of deals, though the value of M&A there fell 10% from a year ago. In contrast to the US, Europe enjoyed an increase in deal value YoY and climbed to USD1.3tn.
Cross-border activity remains a key component of M&A, enabling dealmakers to spread risk and expand their global footprint, which is more commonplace and necessary in today’s economy. This is particularly true of expansion into emerging markets, which can provide a much needed source of growth for legacy firms that have reached market saturation in developed economies.
Despite the slowdown, the typical M&A motivations remain as relevant as ever; scope for efficiency savings, gaining access to operational or sector expertise, upgraded systems and IT structures and expansion into adjacent industries and geographies. In addition, rapid technological and logistical advances are making industry convergence all the more common, with ‘Fintech’ becoming the new buzzword for this phenomenon.
Offshore-i Annual Review 2017 4
THE YEAR AHEADWe believe that the following factors will influence M&A activity over the coming months:
BULL MARKET SCENARIO
Powerful fundamentals are in place – strong corporate cash balances, buoyant equity markets and continued ready availability of debt financing and acquisitions are still seen as an easy way to boost revenue and earnings. However, the risk remains of overpaying for assets.
TECHNOLOGY DISRUPTION
Every industry is being disrupted, as companies utilise technology to adapt to changing distribution channels and consumer preferences. Many non-tech companies are buying strategic assets to better position themselves to differentiate and compete on a global scale.
US TAX REFORMS & REGULATORY SCRUTINY
American companies will benefit from the US tax reform, which lowered the headline corporate tax rate to 21% and permitted US companies the ability to repatriate cash. Offsetting this are increased efforts to block high-profile mergers, along with greater scrutiny of foreign buyers.
CHINESE GOVERNMENT CONCERN OVER OUTBOUND DEALS
Chinese outbound M&A has slowed during in 2017, as Beijing imposes newly introduced capital controls that make it difficult to move money out of the country. While signs of a resurgence have emerged, China’s bank regulator recently cautioned on “systemic risk” in overseas buying.
POLITICAL UNCERTAINTIES
Will the markets continue to remain sanguine in the face of a range of political uncertainties, including the impact of midterm elections in the US, Brexit in Europe, trade disputes and potential geopolitical flare-ups, notably in the Middle East and North Korea.
PRIVATE EQUITY DEPLOYMENT
Cheap debt, generous lending terms and plenty of dry powder has powered Private Equity to new post-financial crisis heights. Interest in Private Equity funds intensified in 2017, as investors hunted for returns at a time of low interest rates but this also meant more competition for deals.
The M&A Environment (cont’d)
In the face of the substantial global geopolitical uncertainly which has overshadowed 2017, the Offshore region’s positive performance is all the more remarkable. Offshore has improved its position, with almost 2,800 deals taking place (similar to levels seen in India and in Spain over the period), making it one of the busiest years recorded for the region.
Offshore deals were led prominently by acquisitions, although a number of companies also chose to add additional financing firepower by issuing new debt and equity to eager investors.
Despite the new regulatory restrictions, China continued to be the prominent acquirer of Offshore targets, with the UK, Taiwan and the USA also highly placed.
2015
2016
2017
USD421bn
2,901
2,735
2,771 deals
USD219bn
USD227bn
OFFSHORE DEALS BY VOLUME & VALUE
Contact UsClick on an image below to visit individual team member biographies
RESEARCH METHODOLOGY
This report details mergers and acquisitions and capital markets activity in offshore jurisdictions in 2017 using data from the Zephyr database, published by BvD. Private equity dry powder data is provided by Preqin. 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 2017 analysis is 1 January 2017 - 31 December 2017. All deal types are included except joint ventures and share buybacks. IPOs and planned IPOs are calculated separately. Deal status is as announced within the time period covered. Certain deals are subject to standard closing terms. Where necessary, deal values have been converted to USD at a rate set by Zephyr. Not all deals have a publicly known value. Not all deal details are reported immediately, and the figures are subject to change as new information becomes available.
ABOUT US
With a broad global footprint, strong working relationships with local regulators and deep transactional experience, Appleby’s M&A team is well-positioned to swiftly advise clients on a wide range of M&A activities in the offshore region.
Our team regularly works with FTSE 100 and Fortune 500 companies around the globe to help them deploy strategic growth and restructuring initiatives whether involving single jurisdictions or complex multi-jurisdictional, multi-disciplinary transactions. Our expertise includes advising on:
• Capital markets transactions including debtand equity issues, and capital raising transactionsincluding private placements, initial public offerings(IPOs), and (in Jersey) cashbox structuringslinked to placings and rights issues ofJersey-listed companies
• Complex joint ventures and strategic alliances
• Corporate restructurings
• Disposals
• Private M&A
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© Appleby Global Group Services Ltd 2018. Published in the Isle of Man. All Rights Reserved.
Timothy FariesBERMUDA +1 441 298 [email protected]
Simon RaftopoulosCAYMAN +1 345 814 [email protected]
Kyle Sutherland ISLE OF MAN +44 (0)1624 647 [email protected]
Malcolm MollerMAURITIUS+230 203 4301
SEYCHELLES+248 429 [email protected]
Jeffrey KirkBRITISH VIRGIN ISLANDS +1 284 393 [email protected]
Wendy BenjaminJERSEY +44 (0)1534 818 [email protected]
Jeremy BerchemGUERNSEY +44 (0)1481 755 [email protected]
Cameron Adderley HONG KONG +852 2905 [email protected]
