Deals targeting companies in offshore jurisdictions saw a massive rise in value in the first half of 2018, according to a new report from the international law firm Appleby.
The total value of all “inbound” transactions — those targeting offshore entities — was $216 billion in the first six months of the year, nearly reaching the $227 million figure totaled in all of 2017.
The number of deals, however, has shrunk a bit: There were 1,344 inbound transactions in 2018 H1, a ten percent drop when compared to the last six months of 2017, according to the report.
Of that amount, 236 deals targeted entities in the Virgin Islands, the third-highest figure for any offshore jurisdiction, behind Hong Kong (334) and the Cayman Islands (421).
Like the overall offshore sector, the VI’s 2018 deal count is slightly behind the pace set last year, when the territory had 505 inbound transactions.
Cayman and Hong Kong were first and second in transaction volume in 2017 as well, with 839 and 592 deals respectively.
Cameron Adderley, a partner and global head of corporate at Appleby, attributed the rise in offshore transaction value to high levels of corporate cash; affordable and accessible credit; and companies that were eager to “head off technological disruption and bolster revenue growth through acquisitions.”
This year’s total deal value was also buoyed by one gigantic transaction: Japan’s Takeda Pharmaceutical Co. acquired a Jersey-based company, Shire Plc, for $62.4 billion, an amount more than for four times larger than the second-biggest offshore inbound deal.
Looking forward
Mr. Adderley was cautiously optimistic about the prospects of offshore’s merger and acquisition business in the second half of the year.
“From a technical perspective, M&A tends to follow a cycle of activity levels and the sustained bull run inevitably leads to speculation over a future retrenchment,” he wrote in the report. “We expect the second half of the year to be busy, but no one can afford to ignore the threats posed by rising interest rates, increasing protectionism, a possible trade war, seemingly unsustainable valuations and a volatile stock market.”
One of the potential positive impacts on global M&A business is China’s Belt and Road Initiative, which is designed to increase economic and trade ties throughout Asia, Europe, Africa and the Middle East, according to the report.
On the negative side, however, publicised debates regarding the size and conduct of technology companies — long considered big drivers of M&A business — have the potential to encourage stiffer regulations that could decrease international deals.