Offshore deal volume and value rise but challenges remain

The total volume of offshore deals for 2012 remained lower than in the two previous years, according to new figures, but average deal value is on the rise.

A report produced by Appleby shows that the final quarter of 2012 was the strongest of the year for offshore M&A activity, with volume up by 27 per cent and value up by 202 per cent compared to the previous quarter.

The value statistic was skewed by the $56bn sale of TNK-BP to Rosneft, as TNK-BP was listed in the British Virgin Islands (BVI), but Appleby said even if the deal is excluded from the data deal value for the quarter was still the third-highest three-month period of the last three years.

Overall there were 14 per cent fewer offshore M&A transactions in 2012 than in 2011, and 26 per cent fewer than in 2010.

The average deal size of $173m for the quarter was the highest average for the last 12 quarters, with average deal size for the year – $103m – also higher than the averages for 2011 and 2010.

The Cayman Islands was the busiest jurisdiction in terms of number of deals, while the BVI, helped by the TNK-BP deal, was the busiest by value. Deal value was also up in Guernsey and Hong Kong.

There was a decline in the number of IPOs in the fourth quarter of last year compared to the same quarter of 2011. In the last three months of 2012, 28 IPOs and planned IPOs were recorded compared to 43 in the same period of the previous year. However the amount raised from IPOs doubled compared to the third quarter of 2012, rising from $450m to $992m and there are 14 planned offshore IPOs in the pipeline.

Almost a third (30 per cent) of all deals involved the financial services and insurance sector.

Appleby chairman Frances Woo said: “We’re 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. 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.”