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Offshore Merger And Acquisition Activity Rises

Wednesday, May 9, 2012

A new report from Appleby shows that transaction values for mergers and acquisitions (M&A) in major offshore financial centers rose by 25% in the first quarter of 2012.

The first ever Offshore-i report from Appleby, the world’s largest provider of offshore legal, fiduciary and administration services, looks at M&A activity for the first quarter of 2012, providing sectoral analysis and expert insight on deal types and geographic trends.

The key findings of the report show that offshore deal values in Q1 2012 increased by 25% from the previous quarter's USD23.2bn to USD30.9bn. However, the volume of deals taking place offshore was down 24% on the last quarter of 2011 and was 26% lower than the same period of last year, revealing that corporate transaction activity continues to be depressed.

The number of transactions in the offshore sector in Q1 2012 amounted to 412. However, while deal volumes were lower than the same period a year ago, the report shows that there is still a reasonable amount of activity going on across the offshore world.

The most popular destinations for investors doing deals involving offshore targets are Hong Kong and the Cayman Islands, while the banking, insurance and financial sector continues to dominate offshore activity, well ahead of the next area of interest, wholesaling.

The report finds that most of the deals in the quarter were minority stake transactions rather than full takeovers.

“It will be interesting to see if this positive increase in values continues into the rest of 2012,” said Peter Bubenzer, Appleby’s Bermuda-based group chairman. “The challenges ahead are manifold, but there are ongoing signs of real buoyancy in Asian and other emerging markets.”

The report says offshore transactional markets have been affected by global economic pressures, and in the first quarter, the United States economy faltered amid fears that any recovery may be lacklustre. This impacted transactions in the offshore jurisdictions of Bermuda and the Cayman Islands, which derive the bulk of their business from America. Continuing uncertainty about the Eurozone, and the potential contagion from Greece of the sovereign debt crisis into the Spanish and Italian markets hit deal drivers elsewhere, the report said, while fears about China's ability to maintain high growth rates further dented confidence. Nonetheless, the report reveals that the continuing strength and attractiveness of the Asian markets is driving investors doing deals involving offshore targets, primarily in Hong Kong and the Cayman Islands.

Meanwhile, Mauritius emerged as the offshore economy experiencing the greatest growth in M&A activity, with the number of deals involving targets there jumping from six to 12 between Q1 2011 and Q1 2012.

Offshore transactions remain dominated by the banking, insurance and financial services sector, which has been consistently ahead of other areas for some time. Mining and extraction and other natural resources sectors are also experiencing activity, with the demand for natural resources coming out of China in particular fuelling activity.

As highlighted in the report, a small number of large deals distorted the statistics this quarter, with the biggest transaction of the period, the USD6bn acquisition by institutional investors of a 14% stake in AIA Group, the largest independent listed pan-Asian life insurance group in the world, dwarfing the USD1.5bn Cinven takeover of Jersey-headquartered CPA, one of the world’s largest legal process outsourcing and Intellectual Property-management firms.

With respect to deals involving offshore acquirers, Jersey completed 23 deals with an aggregate deal value of USD46.2bn in the first quarter of 2012. The report notes that this quarter Jersey was also at the centre of one of the biggest ever mergers seen in the mining sector - the purchase of Xstrata PLC by Jersey-registered commodities trading and mining company, Glencore for approximately USD40bn in shares. Mark Lewis added: "It is really encouraging to see Jersey at the centre of an industry first like this. Jersey continues to attract companies that can see this jurisdiction as giving them an advantageous position from which they can leverage their growth strategies.”

The report found minority stakes are changing hands more often than entire businesses, driven largely by the economic uncertainty that has presented challenges for dealmakers. Additionally, the number of Initial Public Offerings (IPOs) hit a significant low (down from 34 in Q4 2011 to nine in Q1 2012). However, Appleby predicts the number of IPOs is to rise.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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