Jersey acquirers lead acquisitions by value Jersey, 19th February 2013 – The offshore markets experienced their largest quarter-to-quarter rise in M&A transactions in the last three years, according to a report released today by Appleby, the world’s largest provider of offshore legal, fiduciary and administration services. 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 centres, focuses on Q4 2012 while providing a review of the year as a whole and predictions for 2013.

Jersey tops acquisitions by value while numbers down on M&A targets
Jersey acquirers completed the highest value of deals in the offshore markets this quarter, up from USD1.3bn in Q3 2012 to USD34.7bn in Q4 2012. While this substantial increase in value is largely attributable to the USD33bn acquisition of Xstrata by Jersey-based Glencore, Jersey was also home to another significant deal this quarter – the USD1.4bn acquisition of Serasa SA by Jersey-based Experian plc. Jersey acquirers also enjoyed a rise in deal volume as against the preceding three months, up from 19 to 28 deals.

"It is really encouraging to see a Jersey acquirer at the centre of one of the largest global deals of 2012. Jersey continues to attract companies to its shores thanks to its reputation as a sophisticated and well regulated jurisdiction,” said Mark Lewis, Practice Group Head for the Corporate & Commercial department in Jersey.

Where Jersey companies were targets, the lackluster activity levels continued into Q4. The jurisdiction was the target of 28 deals worth a combined value of USD519m – down 64% in value from the preceding three months.

“While the numbers depict a general slowdown in M&A activity levels for Jersey targets across 2012, Jersey has been at the centre of some of the largest and most complex transactions in Europe this year including the US$1.5bn acquisition of Jersey-headquartered CPA Global by Private Equity firm, Cinven in Q1 and the US$750m and US$300m share buy backs deals announced by Delphi Automotive plc, the Jersey, UK-based car parts manufacturer in Q3,” said Mr Lewis.

The CPA Global deal was of particular significance to Appleby, who acted as Jersey counsel to Lloyds (as senior agent) and JP Morgan (as mezzanine agent) on the USD880 million financing of Cinven’s acquisition of CPA Global as well as advising on the syndicate of banks in relation to the financing of the court sanction Jersey scheme of arrangement in connection with the acquisition.

Mr Lewis continued, “Although 2012 has been a challenging year for the M&A markets, plagued most notably by the downturn in the general economy and the Eurozone crisis, we have seen several significant trends emerge. The less risk adverse private equity houses have dominated activity in Jersey this year, both selling and buying assets following a period of inactivity, while European companies continue to accelerate their global exposure, especially where there is an Asian portfolio capability.”

Global Offshore Market: Q4 2012

The key themes emerging from the report show that in the fourth quarter of 2012:

• The number of deals involving offshore targets amounted to 590, up 27% over the previous quarter. This is easily the biggest rise quarter-to-quarter in the last three years.
• The cumulative value of offshore deals was US$101.8bn, up 202% on the previous three months and 282% on Q4 2011.
• The average deal size was USD173m – by far the largest average of the last 12 quarters.
• The financial services and insurance sector continues to dominate offshore M&A activity, accounting for 30% of all deals completed. This sector was considerably busier in Q4 than the preceding quarter, with 14 more deals and spending up USD14.5bn.
• Minority stake transactions remain the most popular deal type by volume. However, acquisitions overtook them in terms of value, accounting for 70% of the money spent.
• There were just 28 IPOs and planned IPOs recorded – this compares to 43 in the same quarter of 2011.
• Cayman remains the most attractive destination for investors looking offshore, with BVI being the busiest market by value. The value of deals was also up significantly in Hong Kong and Guernsey.
• Where offshore companies are acquirers, BVI continues to lead by volume, with 139 deals recorded.
• The offshore region ranks fifth globally by value of M&A deals, on par with that of Eastern Europe, the Nordic States, Africa and the Middle East combined.

Significant uptick in M&A Activity to round off sluggish year

Both the volume and value of deals involving offshore targets increased considerably in Q4 as against the preceding three months, with volume up 27% and value up 202%. While the substantial increase in value is largely attributable to the biggest transaction of the quarter – the USD56bn sale of British Virgin Islands-listed oil exploration business TNK-BP to Russian state-owned oil company Rosneft – it is encouraging to see that if this deal is excluded from the data, the quarter still boasts a deal value of USD45.8bn, placing it as the third highest three-month period of the last three years.

Nevertheless, despite the surge in activity for the last quarter, 2012 overall had 14% fewer deals than 2011, and 26% fewer than 2010.

“While we remain positive about activity levels going forward, there is no escaping the fact that 2012 was another challenging year for M&A in our markets,” said Cameron Adderley, Global Head of Appleby’s Corporate & Commercial department. “2012 was peppered with uncertainty, most notably around the Euro crisis, the US presidential election, and changes of leadership in China and elsewhere. Moving into 2013, the outlook is far from clear and the very real questions remain around the single European currency, America’s challenges related to the so called Fiscal Cliff and China’s continuing growth.”

Average deal sizes, meanwhile, illustrate a depth slowly returning to the marketplace. The average deal size this quarter stood at USD173m, outstripping averages over the last 12 quarters, while average deal size in 2012 surpassed the preceding two years, coming in at USD103m as against USD63m in 2011 and USD71m in 2010.

“We are optimistic that the M&A markets in which we operate will gradually strengthen, not least as a result of the relative health of strategic buyers, the emerging markets and the energy sector,” said Frances Woo, Appleby’s Hong Kong-based Chairman. “Offshore jurisdictions generated two of the world’s largest transactions in 2012 – that of TNK-BP and Jersey based Glencore’s USD33bn purchase of Xstrata. We have plenty of reason to be cautiously hopeful going forward, with general robustness returning to deal value as well as the number of deals coming out of our region growing faster than any other world region apart from the Nordic States this quarter.”

Cayman Islands continues to attract investors offshore

The Cayman Islands remain the most attractive market in the offshore region for M&A targets, with 142 acquisitions of Cayman-incorporated businesses in the fourth quarter of 2012, as against 102 of BVI-targets, in second place.

In terms of value, the BVI tops the table, accounting for USD60.2bn or 59% of dollars spent offshore in the fourth quarter; this compares to 9% in Q3 2012 and 23% in Q4 2011.

Hong Kong, meanwhile, continues to attract investors to it shores, and in the fourth quarter of 2012, saw an uptick in deal activity as against the preceding three months, with volume up 41% and value up a considerable 123%. Moreover, exam