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Business Services | First Quarter 2018

May 2018 – For the First Quarter of 2018, the SCA Business Services Index outperformed the S&P 500. While the S&P 500 declined by 2% due to growing investor worries over rising interest rates and trade restrictions, the SCA Business Services index was up 2.0%. HR Services (up 12.9%) led all sectors, followed IT Services (up 5.3%) and IT Consulting (up 4.3%) which continued their outperformance during recent quarters. The only sector that substantially underperformed was Marketing Services (down 10%) which was negatively impacted by concerns about the revenue outlook for traditional advertising firms given changing media habits.
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Industrial Growth | First Quarter 2018

May 2018 – During the first quarter, returns for the industrials sector in the equity capital markets contracted, with all but one industry posting slight declines. This comes after robust economic expansion with three consecutive quarters of near 3% GDP growth and consumer confidence at a 17-year peak. The Electronics & Components subsector was the only industry with a positive quarterly return of +1.6%, compared with the NASDAQ index edging a slight quarterly return of +0.8%. Recent trade tariff discussions have added uncertainty and downward pricing pressure in the equity markets. M&A activity for the quarter expanded compared to Q4 2017 with 224 transactions announced versus 189 deals last quarter; deal value lagged at $14.0 billion compared to $15.9 billion last quarter.

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Healthcare Services | First Quarter 2018

May 2018 – M&A transaction volume in Q1 2018 was on par with the previous quarter’s total of 380 deals. According to preliminary figures from Irving Levin Associates Inc., a total of 378 transactions were announced in Q1 2018. Compared with the same quarter a year prior, volume was down 14%. Deal value in Q1 2018 totaled approximately $112.9 billion, 2% lower than the previous quarter, but 90% greater than the same quarter in 2017. This quarter’s $67 billion acquisition by Cigna (NYSE:CI) of Express Scripts Holdings (NYSE:ESRX) accounted for almost 60% of total transaction value in Q1 2018.

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Industrial Growth | Fourth Quarter 2017

March 2018 – During the fourth quarter, returns for the industrials sector in the equity capital markets continued their expansion momentum with the majority of the subsectors followed by SCA continuing their positive returns after two consecutive quarters of 3% GDP growth and consumer confidence at a 17-year peak. The Metals subsector led the industry with a quarterly return of +13.5%, compared with the S&P 500 quarterly return of +5.7%. Other industry subsectors with notable positive quarterly growth include Precision Machine Products +9.0%, Resource Recovery & Waste Management +5.4%, and Analytical Instrumentation & Testing Equipment +4.3%.

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Capital Restructuring | Fourth Quarter 2017

February 2018 – Moody’s and S&P reported year end default rates of 3.3% and 3.0%, respectively. Signs are that inflation is starting to dictate a rise in interest rates. The long-anticipated rise in interest rates will likely cause corporate borrowers that have avoided restructuring due to years of favorable monetary policies to begin to feel the stress of overleveraged balance sheets, and the increasing cost of borrowing may start to contribute to higher default rates potentially starting in late 2018 or early 2019.

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Business Services | Fourth Quarter 2017

February 2018 – For the fourth quarter of 2017, the SCA Business Services Index increased by 6.7% slightly above the increase of 5.7% for the S&P 500. IT Services and IT Consulting (up 8%), continued to outperform all other sub-sectors, driven by continuing demand for IT support services, both domestically and abroad, as well as accelerating M&A activity with the sector. As throughout 2017, investors continue to remain bullish on the outlook for all types of technology-enabled, outsourced services.
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Healthcare Services | Fourth Quarter 2017

February 2018 – Healthcare M&A transaction value in 2017 totaled approximately $315.2 billion, 23% higher than the previous year. The proposed merger of CVS Health Corp. (NYSE: CVS) and Aetna (NYSE: AET) accounts for $77 billion, or 24% of the year’s total. Excluding this merger, M&A spending in 2017 would have been 7% less than 2016, according to preliminary figures from Irving Levin Associates, Inc. Transaction volume for healthcare M&A in 2017 totaled 1,543 transactions, relatively flat as compared with 2016’s record-breaking volume of 1,593 transactions.
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Industrial Growth | Third Quarter 2017

December 2017 – During the third quarter, returns for the industrials sector in the equity capital markets continued their expansion momentum with the majority of the subsectors followed by SCA continuing their positive returns after two consecutive quarters of 3% GDP growth and consumer confidence at a 17-year peak. The Precision Machine Products subsector led the industry with a quarterly return of +10.5%, compared with the S&P 500 quarterly return of +3.7%.

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Capital Restructuring | Third Quarter 2017

November 2017 – Both Moody’s and S&P reported a drop in the default rate at the end of the Third Quarter 2017 to 3.3% and 3.1%, respectively. Both credit rating agencies forecast a further decline in the default rate, with Moody’s expecting the default rate to close the year at 3.1%, and S&P expecting the default rate to decrease to 2.8% by June 2018.

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Business Services | Third Quarter 2017

November 2017 – For the third quarter of 2017, the SCA Business Services Index increased by 5.0% compared with an increase of 3.7% for the S&P 500. While the Business Services sector as a whole outperformed the broader market, several sub-sectors were notable for their performance. In particular, IT Services (up 8%), HR Services (up 12%) and Marketing Services (up 16%) all enjoyed very strong performance in the quarter. Overall, investors remain very bullish on the outlook for all types of technology-enabled, outsourced services.
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Healthcare Services | Third Quarter 2017

November 2017 – Transaction volume in healthcare M&A for Q3 2017 totaled 334 transactions, 14% lower than the same period in 2016 and 10% lower than the preceding quarter, according to preliminary figures from Irving Levin Associates Inc. Deal value in Q3 2017 totaled $42.8 billion, 12% lower than the same period in 2016. The services sector remained strong in Q3 2017, with 211 transactions accounting for 63% of the total volume. Managed care transactions were up 167% from the same time last year led by Centene Corporation’s (NYSE: CNC) $3.8 billion deal to acquire not-for-profit Fidelis Care as an initiative to enter the State of New York, the second largest managed care state by membership in the U.S. eHealth transactions increased 45% as revenue cycle management companies remain a strong investment opportunity for financial buyers. As of mid-September, 52% of revenue cycle management targets were acquired by private equity firms or other PE-backed eHealth platform companies. The behavioral health sector was also active in the quarter with a 44% increase in transactions over the same period last year as strategic and financial buyers seek to capitalize on significant industry fragmentation and growing demand that currently outstrips supply. Recent legislative changes have expanded the availability of behavioral healthcare services and have opened new channels for industry activity.
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