Busy first half of 2018 for M&A in Guernsey

04 October 2018

Merger and acquisition activity in offshore jurisdictions in 2018 is racing ahead of the previous, according to new research from law firm Appleby.

The value of global offshore M&A deals in the first six months of the year nearly matched the total recorded for the whole of 2017, it said. But while value is up the volume of offshore deals was down on the second half of 2017.

Appleby, in its Offshore-i report, said the Crown Dependencies had a strong performance in the first half of the year. The number of deals involving Guernsey targets was similar to the latter half of 2017, while deal volume was ahead in Jersey and the Isle of Man.

“The Crown Dependencies are making a strong showing in 2018, with investment funds and manufacturing companies featuring prominently,” said Wendy Benjamin, Group Partner at Appleby (Guernsey). “The International Stock Exchange, which is headquartered in Guernsey, is also reporting impressive growth in the rate of new listings.”

Collectively, the Crown Dependencies showed a strong preference for domestic deals in the first half of 2018, which Appleby said demonstrated faith in the local economies and a recognition that there are local targets worth investing in.

In total, there were 1,344 deals recorded in the first half of 2018, representing a 10% decrease when compared to the last six months of 2017. The total deal value of $216bn marked a 68% increase over the second half of 2017.

Billion-dollar deals have become frequent offshore, with 28 reported in the first half of this year. The surge of big transactions has been bolstered by a desire by boards of major companies to head off disruptive technological threats and accelerate growth, according to the report. The most frequent types of deals were acquisitions, capital increases and minority stakes in other companies.

“Increasingly, firms are choosing to top up an existing stake and secure control of an investment outright,” said Cameron Adderley, Partner and Global Head of Corporate at Appleby. “This makes sense with the increasing competition for quality targets, a low-risk environment and easy access to finance.”

Last year saw new highs for offshore IPOs and that momentum has continued into 2018, with 180 companies announcing their intention to go public in the first half of the year.

“Pent-up investor demand for fast growth investments, including small-cap listings, makes it a good time to go public,” Mr Adderley said. “Economic conditions remain encouraging, equity valuations remain high in many parts of the world, and interest rates remain low.”

The top sub-sectors for announced offshore IPOs were information service activities and financial services.

The report also flagged the private equity sector as being “at a crossroads”, with funds sitting on record amounts of cash reserves but facing challenges due to high valuations and rising competition from free-spending corporations, with lower performance expectations.

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