In Q3, Jersey sees 11% increase in deal volume, emerges as a leader in average deal size

Despite a dip in the value and volume of offshore deals in the third quarter of 2014, the year as a whole is on track to be among the best showings for offshore M&A in the past decade, according to a report released today by Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services. In Jersey, the number of deals jumped 11% in Q3 2014 when compared to the previous quarter, while total deal value held steady.

The latest edition of Offshore-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 third quarter of 2014.

According to the report, the third quarter of the year experienced a 46% drop in total value of offshore deals when compared to the exceptional previous quarter. Appleby noted, however, that historically the Q3 2014 numbers are strong with deal value up 25% over the same quarter in 2013.

Jersey Deal Activity 

In the third quarter of 2014, Jersey was home to 41 deals worth a total of USD4.27bn giving the jurisdiction an average deal size of USD104m, the highest across offshore jurisdictions. While the total value of deals was almost identical to that of the previous quarter, it represented a significant 253% increase over Q3 2013.

“Among the offshore jurisdictions, Jersey experienced the biggest increase in total deal value between the third quarters of 2013 and 2014,” said Wendy Benjamin, Practice Group Head for the Corporate & Commercial department in Jersey. “This past quarter was a busy time for local dealmaking and we expect the momentum to continue.”

Jersey attracted two of the top 10 deals in Q3 2014. In what was also the quarter’s biggest share buyback, Glencore, the mining business based in Jersey, announced plans to buy up to USD1.66bn of its shares as part of a promise to return cash to shareholders and rein in spending. The other deal saw Max Property Group selling MPG Opco, a Jersey-based closed ended real estate investment services firm, for USD1.1bn to Marina Topco, also of Jersey and controlled by The Blackstone Group.

The M&A Environment 

In the third quarter of 2014, 626 deals were announced involving offshore targets, which in combination were worth USD48.1bn.  Following the 677 recorded deals in Q2 2014, the quarter maintains an impressive run of 600-plus deals per quarter that began in 2013, the report found.

In addition, the average deal in the third quarter of 2014 was worth USD77m, making it the fifth most prosperous quarter for average deal size since the start of 2010, a period of almost 20 quarters. For the first three quarters of 2014, Appleby said an average of USD102m has been spent on each transaction. Only the boom year of 2007 has come close to that level, when the average was USD100m.

The third quarter boasts nine transactions worth in excess of USD1bn, and two that exceed USD2bn. Appleby also noted that deals worth less than USD100m made up a significant proportion of the quarter’s spending, marking a welcome return of activity in the lower end of the value chain.

“Overall, the year 2014 is set up to be a peak year for value of deals conducted in our offshore markets,” said Cameron Adderley, Partner and Global Head of Corporate & Commercial. “The first three quarters of the year have a combined total deal value north of USD200bn, which has only been exceeded in two years over the last decade. This year should surpass even those two annual totals when the Q4 numbers are included.”

Key Themes of Q3 2014:

  • There were 626 deals in the quarter, down on the 677 recorded in Q2 2014. That number is expected to creep higher as late deal news is announced.
  • The third quarter maintains the run of 600-plus deals per quarter that started in 2013.
  • The value of deals was USD48.1bn, which represents a 46% drop on the previous quarter, but is up 25% on the third quarter of last year.
  • The most popular type of deal was minority stake transactions, which once again accounted for more than half of all offshore deals.
  • The financial and insurance sector was the busiest in the third quarter, returning to the top after being overtaken by information and communications, and manufacturing, in the last quarter.
  • Acquisitions dominated in terms of value. IPO activity, meanwhile, slowed down in Q3 after several quarters of major activity.
  • While the bulk of the report focuses on international acquirers buying offshore assets, it also looked at outbound deals in which an offshore jurisdiction acted as an acquirer. A total of USD61.7bn was spent overseas by offshore companies this quarter, including 10 deals worth in excess of USD1bn. China was the main target for offshore outbound deals.
  • There were 11 outbound deals for Russian targets, disproving the belief that Russian activity would cease due to sanctions now being applied to various economic interests in the country.