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Offshore deal value continues to rise, says Appleby

The combined value of offshore deals in the second quarter of 2014 jumped 23 per cent over the previous one, making it one of the highest value quarters of the past decade, according to a report by Appleby.

Given that the first half of the year is frequently quieter than the second half, this is encouraging news for the remainder of 2014, says Appleby.
 
The latest edition of Offshore-i, an Appleby report that provides data and insight on merger and acquisition activity in the major offshore financial centres, focuses on transactions announced during the second quarter of 2014, a period in which the firm observed a considerable uptick in deal size. 
 
“For six consecutive quarters total deal values have either increased or remained level, and the last three quarters have seen values jump more than 20 per cent on the quarter previously,” says Cameron Adderley, partner and global head of corporate and commercial. “Companies appear to be putting more money to work on offshore deals, and an upward trajectory is gathering momentum.”
 
In the second quarter of 2014, 632 deals were announced involving offshore targets, which in combination were worth USD80.9bn. The number of deals is almost identical to the 642 deals recorded in the first quarter of the year.
 
The average deal size of USD128m in the second quarter of the year is the highest in the past decade, aside from the anomalous final quarter of 2012 when a single USD56bn transaction caused average deal values to spike.
 
The firm attributed part of the quarter’s total deal value to the USD20bn planned IPO of Alibaba Group, the Cayman Islands incorporated ecommerce site, which is headed for the New York Stock Exchange. Still, with three deals worth north of USD2bn, even if the Alibaba transaction is excluded, the report found the quarter records a cumulative three-month deal value that exceeds anything seen in 2013.
 
While the numbers are largely positive, the report strikes a cautionary note due to uncertainties in some global markets, including North America and Russia.
 
“We have come to appreciate the health of the offshore markets as a welcome sign of returning strength on a global level, and we hope that this proves to be the case,” said Frances Woo, group chairman of Appleby. “Nonetheless, we remain cautious as the second quarter witnessed a 14 per cent drop in deal value in North America, and tensions between Russia and the West over Ukraine could yet have a significant impact on regional and even global M&A activity.”
 
The Cayman Islands continued to be the busiest offshore destination in Q2 2014 with 205 deals announced worth a total of USD40.6bn. The jurisdiction accounted for 32 per cent of all offshore deals and half of all dollars spent on offshore targets. The number of local deals was up 45 per cent when compared with the same quarter last year, and the jurisdiction’s deal value was up 267 per cent as a result of the planned Alibaba Group IPO.
 
The British Virgin Islands (BVI) ranked second by number of deals with 112 and Hong Kong followed closely with 100. In terms of value, Cayman was followed by Hong Kong, which had a cumulative value of USD14.5bn, and BVI, where deals totalled USD10.7bn.

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