Business in the Caymans: The Financial Sector’s Golden Child

The business benefits of domiciling a company offshore are well-documented. Data suggests the advantages overwhelm the deficiencies for qualifying businesses. Cayman’s Special Economic Zone (SEZ) and most notably, Cayman Enterprise City (CEC) are no exception─one must search far and wide to one-up the impact of these initiatives.

Cayman Enterprise City, encompassed in the SEZ, is designed to attract and keep organizations from five distinct business sectors: marketing and media, outsourcing, biotechnology, commodities and derivatives, and internet and technology. This innovative design─founded in distinct silos of knowledge─forms the foundation for the unique international hub the CEC has become. Looking at the SEZ in its entirety, Cayman tops the list as the #1 jurisdiction for hedge funds and private equity across the globe, and is the tenth largest financial center, with 40 of the world’s 50 most prestigious banks having a presence.

With 59 percent of CEC companies originating in North America─and a cumulative economic impact of nearly $50M USD on Cayman’s local economy─Cayman is the clear winner. Incenting top businesses and business executives by offering tax neutrality (while making it relatively red-tape free to set up shop) has boosted their local economy and fortified their international brand.

To the victor go the spoils. In this case, the victor is the Cayman government and its people─and the spoils are green and countable. But in this game, second is not a bad place to be. Companies domiciled in the SEZ are exempt from corporate tax, sales tax, income tax, capital gains tax, and import duties. Companies with 100 percent foreign ownership can access all tax exemptions. Work visas for employees can be acquired within five business days. And if intellectual property is at the core of your company’s assets, you’ve hit pay dirt.

“There is good reason private equity has found a home in the Cayman Islands. They have crossed every ‘t’ and dotted every ‘i’, anticipating and removing each potential hurdle,” states Alfred Zaccagnino, President of Samarian Group of Companies. “Watching the Cayman Islands develop as an international business center has been remarkable.” The Samarian Group established a presence in the Cayman Islands in 2011 and, like most companies, plans to stay long-term.

In October 2015, Cayman will be added to the list alongside 90 other countries in implementing a Common Reporting Standard─an effort to streamline the automatic exchange of information (AEOI) with other countries related to taxation. Implementation will begin in 2017─and true to its recent history, the Cayman Islands will undoubtedly use this to further its brand as a leader in international business.

Why Do Firms Choose Divestiture?

Alfred Zaccagnino leverages over a decade of entrepreneurial experience to lead the Samarian Group, Ltd., a boutique financial services company providing advisory and consultation on a variety of corporate transactions. As president, Alfred Zaccagnino oversees the organization’s partnerships with corporations, foundations, endowments, and other financial entities, assisting such institutional clients with activities including asset divestiture.

Divestiture is a method of asset management that can assist a company in reducing or refocusing its portfolio. Achieved through the exchange, closure, or sale of assets, as well as via bankruptcy, divestiture occurs when a company either partially reduces or completely shuts down a specific business unit.

A firm’s management may choose to divest a portion of its assets or operations for a variety of reasons. Companies often carry out divestitures to free up financial resources for other business areas or to increase their profitability in general. They may also divest business units that fall outside of their core competency, or to get rid of redundant operations following a merger or acquisition. In some instances, divestiture can be the result of a court order. Court-ordered divestitures are generally aimed at increasing market competition and preventing the development of monopolies, as was the case in the breakup of the Bell System in 1982.

Upward Trend in Mergers and Acquisitions

As founding partner and president of the Samarian Group, Ltd., Alfred Zaccagnino leads the boutique investment firm in delivering a variety of financial services aimed at helping clients grow and preserve their wealth. Backed by partnerships with agents, broker dealers, and other financial organizations, Alfred Zaccagnino and his fellow executives offer corporate consultation on matters such as mergers and acquisitions.

As noted by leading financial professionals from Wall Street to Hong Kong, 2015 is likely to be the strongest year for mergers and acquisitions (M&A) since 2007. Although the number of M&A transactions in the first half of 2015 is similar to the amount observed during the first six months of 2014, the sizes of these deals continue to increase. As large firms seek to spur revenue and market share growth, the sector has seen a 42 percent increase in transactions exceeding $5 billion.

This ongoing consolidation has resulted in a faster-paced environment for mergers and acquisitions, as prospective buyers must act quickly to take advantage of limited M&A opportunities. According to experts such as Centerview Partners co-founder Blair Effron, this is especially true of the rapidly consolidating pharmaceutical and telecommunications sector. This upward M&A trend has also increased the likelihood of firms intervening in the transactions of rival corporations, attempting to make the most compelling offer in M&A efforts that are often the result of years of research and analysis.