The value of M&A and IPO deals targeting Isle of Man companies rose to USD1.4bn in the first three months of 2015, an 83% increase on the final quarter of 2014, according to a report released today by Appleby, one of the world’s largest providers of offshore legal, fiduciary and administrative services.
The latest edition of Offshore-i, an Appleby report that provides data and insight on corporate transaction activity in the major offshore financial centres, focuses on deals announced during the first quarter of 2015.
Across most offshore jurisdictions there was a drop in the number of transactions when compared to the previous quarter, with total deal value remaining level, due in part to three megadeals each worth in excess of USD5bn. This trend was not reflected in the Isle of Man however, where both the volume and value of deals increased in Q1 2015.
Isle of Man Corporate Group Head and Partner Faye Moffett said: “This latest report is extremely encouraging for the Isle of Man, where we have seen a flurry of activity across a number of different sectors from IT and financial services, to oil and gas and engineering. The numbers speak for themselves, it has been a very positive start to 2015 for the Isle of Man and hopefully we will see this trend continue for the remainder of the year.”
Appleby Partner and Global Head of Corporate Cameron Adderley, added: “At more than USD68bn for the first quarter of the year, cumulative deal value remains at the same high level of the preceding quarter, despite there being more than 150 fewer transactions. The result, clearly, is a bumper average deal size, which has been topped in only two quarters over in the past decade.”
The Transactions Environment Across Jurisdictions
Overall there were 537 deals in Q1 2015, down 24% from the previous quarter. Deal value in the first three months of year, however, registered at USD68.3bn, which matches the previous quarter and is among the highest in the last decade.
This quarter’s average deal size came in at USD127m, fuelled by 14 deals worth more than a billion dollars each, including three USD5bn-plus deals and an additional two deals worth more than USD4bn each. Looking back as far as 2004, there has only been one previous quarter that included three USD5bn deals, and in that case, two of the three were related to a single transaction, the acquisition of TNK-BP.
Low interest rates and cash on balance sheets have helped drive big deals, while M&A has proved a quick way to add revenue at a time when existing markets are mature or subdued, and opportunities for growth appear limited, the report found. There is also evidence that the rise of the megadeal is a global phenomenon that may be driven by more targeted M&A decision-making post-crisis, with acquirers willing to make sizeable investments but only after scrupulous analysis of targets.
Frances Woo, Group Chairman of Appleby, said: “Last year was clearly the best year for offshore deal activity on record and the hot start to 2015 gives us reason to be optimistic. That said, we are ever watchful of potential bumps in the road, be they the result of the still ongoing uncertainty in the Eurozone, tensions between the West and Russia, the recent UK General Election and slower growth in parts of Asia. Offshore deal activity is robust, but ever-dependent on much larger constituents of the global M&A and capital markets.”
Offshore Region Continues to Spend Big
While the majority of the report focuses on international acquirers buying offshore assets, Offshore-i also examined outbound deals in which an offshore jurisdiction acted as an acquirer. The report found that while the number of these deals dropped from the previous quarter, offshore jurisdictions spent USD84.7bn in Q1 2015, an increase of 32% over Q4 2014.
Additionally, the average value of outbound deals was USD156M, a number that has not been seen in the last decade. Q1 2015 was only the third quarter since 2004 with an average deal size greater than USD100m.
Key themes of Q1 2015:
- There were 537 deals in the quarter, the lowest quarter by deal volume since the start of 2008. The total is likely to edge higher with late reporting of deals.
- The value of deals was USD68.3bn, almost identical to the previous quarter and before that topped only a handful of times in the past 10 years. With value the same and more than 150 fewer deals than Q4 2014, average deal size is up to USD127m, one of the highest on record.
- This is the fifth quarter in the last six to record more than 10 deals worth over USD1bn, after only four such quarters in the preceding decade. There were 14 billion-dollar deals in total in Q1 2015, including five deals worth in excess of USD4bn each.
- The financial and insurance activities sector was once again on top, thanks to three insurance-related deals featuring in the top 10 for the quarter. Deal value remains widely dispersed with 14 subsectors showing cumulative deal activity worth more than USD1bn.
- Capital increases are the most popular deal type, closely followed by acquisitions, which similarly represent about a third of total deal volume. Acquisitions dominate by deal value.
- Q1 was one of the busiest quarters ever for outbound deals involving offshore acquirers, with 542 outbound deals worth USD84.7bn, a sum that makes it the second biggest quarter yet recorded. Outbound deal value jumped 32% from the previous quarter, which was part of a record-breaking 2014.
- The offshore region remains ranked sixth in the world by deal volume for Q1 2015, and stays in fourth for value activity. By average deal size the region rose to second worldwide, behind only North America, as a result of the run of megadeals using offshore jurisdictions.
