IFLR 1000
The Guide to the World's Leading Financial Law Firms

Attorneys report a noticeable increase in both deal work and funds formation, especially over the past six or seven months. Cheaper lending, the return of equity investors, and a "reorganisation of the players" are all favourable influences on the market....

Attorneys report a noticeable increase in both deal work and funds formation, especially over the past six or seven months. Cheaper lending, the return of equity investors, and a "reorganisation of the players" are all favourable influences on the market. "Companies like Goldman, JPMorgan, UBS, Citibank, and RBS have seen the opportunity and are all coming back," notes one attorney. "Deals are straightforward and structured better. It used to take three months to complete them; now it takes six."

Another important signal that the economy is improving is the return of collateralised loan obligations (CLOs), which were hit hard by the 2008 crisis. As the SPVs (Special Purpose Vehicles) that buy the loans put out by the middle market, these are significant to economic recovery.

M&A activity has also been picking up steadily. "A lot of merging within the investment management industry has created a far better spread of talent," notes one source. Market feedback indicates that the adoption of the Companies (Amendment) Law 2009, which introduced a statutory provision for merging two entities that does not require cumbersome and costly court approval, has played a positive role. Additionally, the Companies (Amendment) Law 2011, which came into effect in April, was introduced to make the jurisdiction more attractive to international businesses. It provides increased flexibility and clarity, as well as codifying some existing common law practices.

Most of the work remains driven by US-based multinationals. However there has been a significant uptick in incorporations and structuring coming out of Asia, especially Hong Kong and China, with other emerging economies continuing to grow in importance and influence.

The Cayman Islands is a world leader for the establishment of offshore funds, with 75% of the world's hedge funds registered there. About 1111 new funds were registered in 2010, of a total of almost 9500. Private equity fund formation in particular has been turning around to such an extent that one attorney notes, "The formation of hedge funds is back to pre-bubble level."

The Cayman Islands continues to be very active in entering into Tax Exchange Agreements and as of going to press had signed them with over 20 countries, including all of the G8. Lawyers report that regulatory authorities are keen to increase that number.

"In general, things are moving along nicely in an upward motion," concludes one partner. "Still, it will take us an enormous amount of time to get back to pre-crisis levels, although I'm not sure we want to because the market was so over-leveraged."