New York, February 13, 2014—Quarter by quarter offshore deal volumes rose steadily throughout 2013, resulting in a cumulative 12-month deal value topped only three times in the last decade, according to a report released today by Appleby, one of the world’s largest providers of offshore legal, fiduciary and administration services. 

The latest edition of Offshore-i, which provides data and insight on merger and acquisition activity in major offshore financial centers, focuses on deals during the fourth quarter of 2013, as well as the year overall. The firm observed considerable gains in Q4 over the previous quarter in terms of the number of deals, their cumulative value, and average deal size.

“While the final quarter of the year is typically the busiest, every one of the principal indicators has progressively improved,” said Cameron Adderley, Partner and Global Head of Corporate & Commercial. “Indeed, the global M&A environment is fragile and to an extent lacks depth, but we can’t help but view these year-end numbers as positive.”

The M&A Environment

There were 607 offshore deals announced in the fourth quarter of 2013, with a combined deal value of $47.9 billion. The figures reflect a trend of steadily upward-moving offshore deal volumes, with a 6% increase in transaction numbers compared to the 572 deals that took place in Q3 2013, and a very positive story for deal value. The amount of money spent on offshore targets rose by 32% in Q4, up from $36 billion in the third quarter, and also significantly higher than Q1 and Q2 levels for 2013.

The 10 largest transactions in Q4 2013 contributed one third of total deal value for the three-month period. This represents the lowest number for this measure in the past four years, with a substantial uptick in smaller deals. The Q4 report marked the first time Appleby analyzed the value range of transactions and found the number of $1billion-plus deals (11) is attractive and that the return of the mid-market engine is happening, albeit slowly.

“It’s especially noteworthy that in 2013 the largest transactions contributed a much smaller percentage of the total number of deals – around 33% compared to 50% in 2012,” said Frances Woo, Group Chairman of Appleby. “We see the smaller percentage as good news because it signals a broad strengthening of activity across the deal-size spectrum.”

Geographic Trends:

Over the course of 2013, Cayman companies generally dominated offshore M&A activity as the target for most deals in three of the four quarters. In Q2 2013 the islands were briefly overtaken by the British Virgin Islands, but in Q4 Cayman targets accounted for more than one in four of the deals done offshore, and for a third of the dollars spent.

In the fourth quarter the Cayman Islands saw 168 deals with a combined worth of $15.6 billion, as against 158 deals worth $13.4 billion in Q3. When compared to the same quarter a year ago, the volume levels remain broadly consistent, but value is over $4 billion higher than Q4 2012.

Bermuda performed very well in Q4, closely following Cayman by value.  The Bermuda market saw 116 deals with a combined worth of $15.3 billion, almost equaling Cayman for value despite 52 fewer transactions. For Bermuda the quarter was a particularly strong one, with value up 132% on the previous quarter, and volume up 26%. When compared to Q4 2012, the value of Bermuda’s transactions is up 51%.

Key themes of Q4 2013:

•     There were more deals in the fourth quarter of 2013 than in any other quarter last year, with 607. Throughout the year deal volumes rose steadily quarter-on-quarter.

•     The value of deals was $47.9 billion in Q4, up 32% on the previous quarter. The average deal size was $79 million and has only been higher in three quarters in the last four years.

•     There were 11 $1 billion-plus deals in Q4 2013, almost double the number in the previous quarter, including two worth over $2 billion. Energy and natural resources deals feature heavily.

•     Financial services and insurance continues to be the most active sector, while mining, quarrying and various manufacturing sectors were also busy.

•     The largest type of deal by volume was a minority stake, but acquisitions continue to grow in number and were the biggest deal type by value, making up almost half of the deal value in Q4 2013.

•     IPO activity remains encouragingly strong, with 62 IPOs pending or completed in Q4 2013 as against 28 in the same quarter of 2012.

•     Bermuda as an offshore target had a breakout quarter and more than doubled the value of deals done on its shores, almost equaling the $15.6 billion deal value for Cayman.

•     The frequency of buying activity by offshore companies continues to grow and the combined value of such deals was $37.8 billion in Q4 2013, one of the largest amounts in the past few years.

•     Offshore ranks sixth amongst world regions for deal volume in Q4 2013; fifth for deal value; and third for average deal size. Only North America and South and Central America record a higher deal average.