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Capital Restructuring | Third Quarter 2016

November 2016 – Default rates reported by both Moody’s and S&P reached 5.0%+ during Q3 2016 at 5.4% and 5.0%, respectively. According to Moody’s, default risk will remain higher in the energy sector than in other industries over the next year. Further, Moody’s expects the speculative-grade default rate to climb from 5.4% currently to end the year at 5.9% before declining to 4.1% by Third Quarter 2017.

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Business Services | Third Quarter 2016

November 2016 – For the third quarter of 2016, the SCA Business Services Index increased by 0.9% compared to an increase of 3.1% for the S&P 500. While the overall Business Services sector underperformed relative to the broader market, several sectors outperformed the S&P 500. In particular, marketing services stocks were up 19%, while professional staffing stocks were up 4.6% as concerns about slowing economic growth were mitigated during the quarter.
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Healthcare Services | Third Quarter 2016

November 2016 – Deal volume in healthcare M&A in Q3 2016 totaled 363 transactions, ranking the quarter as the second-highest in deal volume for any previous third quarter, according to preliminary figures from Irving Levin Associates. Inc. As compared to the same period a year prior (the top-ranked Q3 for deal volume) deal volume in Q3 2016 declined 12%. In terms of transaction dollar volume for healthcare M&A, Q3 2016 totaled $48.0 billion, which in most other years would be a respectable amount. However, in recent years, spending has become so outsized that Q3 2016 transactional dollar volume is down 75% from the same period a year prior, a period which had two deals comprising $43.9 billion, or 91% of the entire Q3 2015’s dollar volume.
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Healthcare Services | Second Quarter 2016

July 2016 – In contrast to overall middle market M&A deals which fell to levels not seen since 2009, deal volume in healthcare M&A increased in Q2 2016 as compared to the same quarter a year prior, according to preliminary figures from Irving Levin Associates. Inc. Deal volume in the healthcare sector in Q2 2016 reached 396 announced transactions, up 11% vs. Q1 2016’s 358 deals, and 15% higher than last year’s 344 deals in Q2. For the first half of 2016, deal volume reached 755 transactions, up 5% compared with the first half of 2015 (721 deals). Transaction dollar volume for healthcare M&A was also up in Q2 2016 as compared to prior periods. Committed healthcare financings in Q2 2016 reached $88 billion, up 9% over Q1 2016 and up 59% from Q2 2015. Spending for the sector in the first half of 2016 reached $168.9 billion, a 4% increase compared with the same period in 2015 ($162.4 billion).
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Healthcare Services | First Quarter 2016

May 2016 – 348 healthcare M&A transactions were announced in Q1 2016, according to preliminary figures from Irving Levin Associates. Inc., down 8% from the same period a year prior. Comparing against a record breaking year in 2015, Q1 2016 transaction dollar volume was down 26% against the same period a year prior, but Q1 2016 still posted a solid total transaction value at $79.4 billion. The Healthcare Services sector consisting of hospitals, physician practices, diagnostic laboratories and outpatient centers accounted for 62% of all healthcare M&A activity in Q1 2016 (216 deals), down 3% compared with the same period a year prior.
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Healthcare Services | Fourth Quarter 2015

February 2016 – 2015 was a record-breaking year for healthcare M&A with 1,460 transactions and $563 billion of deal value, according to preliminary figures from Irving Levin Associates. Inc. Virtually every sector tracked by Irving Levin posted an increase in transaction volume. The Healthcare Services sector consisting of hospitals, physician practices, diagnostic laboratories and outpatient centers accounted for 62% of all healthcare M&A activity (903 deals), up 18% compared with the previous banner year of 2014. The Behavioral Health Care, Managed Care and Rehabilitation sectors also experienced strong growth in announced transactions during the year.

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Capital Restructuring | Second Quarter 2016

August 2016 – Default rates reported by both Moody’s and S&P climbed to 5.1% and 4.3%, respectively, during the Second Quarter. According to Moody’s, defaults are expected to worsen before improving in 2017. Commodity-related sectors are still under distress, including Metals & Mining and Oil & Gas. Moody’s reports that the default rate is forecasted to finish the year as high as 6.4%.

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Industrial Growth | Second Quarter 2016

August 2016 – During the second quarter, returns for the industrials sector in the equity capital markets were improved with five of the seven subsectors followed by SCA generating a positive return. The Resource Recovery & Waste Management subsector led the industry with a quarterly return of +9.6%, compared with the S&P 500 quarterly return of +1.3%. Other industry subsectors with notable positive quarterly growth include Metals +6.9% and Chemicals +1.1%.

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Industrial Growth | First Quarter 2016

May 2016 – During the first quarter, returns for the industrials sector in the equity capital markets were positive across the board with all seven subsectors followed by SCA generating a positive return. The metals subsector led the industry with a quarterly return of +21.4%, compared with the S&P 500 quarterly return of +2.3%. The other subsectors of the industry with notable positive quarterly growth include Electronics & Components +19.4%, Precision Machine Products +16.1%, and Resource Recovery & Waste Management +12.9%.

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Industrial Growth | Fourth Quarter 2015

February 2016 – The fourth quarter did not end well for the industrials sector as many key fundamentals reported sharp declines. Importantly, factory orders (-2.9%), orders for both durable (-5.0%) and non-durable (-0.8%) goods, and core capital goods (-4.3%) all declined due primarily to weakness in oilfield machinery as well as communications equipment. Capital spending for the quarter fell at an annual rate of 1.8%, representing the first such decline since Q3 2012. Headline swings in industrial order data are not unusual, but many of the recent details here point to…

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Capital Restructuring | First Quarter 2016

May 2016 – Moody’s and S&P are expecting year-end default rates to continue to climb from current levels. According to Moody’s, defaults during 2016 will likely continue to be concentrated in a select number of industries, led by Metals & Mining and Oil & Gas, and is forecasted to reach 6.2% by year end. S&P reported a 3.8% default rate at the end of Q1 2016, slightly lower than their 2016 year-end forecast of 3.9% and then climbing to 5.3% by the end of Q1 2017, as low commodities prices will continue to plague debt issuers from those sectors.

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Capital Restructuring | Fourth Quarter 2015

February 2016 – Moody’s default rate finished 2015 at 3.2%, while the S&P default rate rose to 2.8%, its highest level since 2013. According to Moody’s, defaults in 2016 will likely be concentrated in a select number of industries. There were 75 Chapter 11 bankruptcy filings in 2015 that involved debt of $100 million or more. The number of large Chapter 11 cases in 2015 was at its highest since 2010.

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Business Services | Second Quarter 2016

August 2016 – For the second quarter of 2016, the SCA Business Services Index decreased by 1.5% compared to an increase of 1.3% for the S&P 500. The Business Services sector’s overall underperformance relative to the broader market was driven by concerns over slowing economic growth, particularly in the areas of staffing and employment related services. This continues a year-long trend of month-over-month deceleration in temporary staffing growth and a decline in the temporary staffing penetration rate.
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Business Services | First Quarter 2016

May 2016 – For the first quarter of 2016, the SCA Business Services Index increased by 6.4% compared to an increase of 2.3% for the S&P 500. While the Business Services Index overall outperformed the broader market, performance among the sectors varied considerably. Marketing Services had a strong quarter driven by a forecast that U.S. media ad spending, will increase by over 15% in 2016. On the other side, Staffing and HR Services underperformed the markets, driven by broad concerns about slowing growth and month-over-month declines in temporary staffing and the temporary staffing penetration rate.

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Business Services | Fourth Quarter 2015

February 2016 – For the fourth quarter, the SCA Business Services Index increased by 3.6% compared to an increase of 6.2% for the S&P 500. While most Business Services sub-sectors underperformed the S&P 500, only the Specialty Consulting Index (decline by 3.6%) declined for the quarter as it reflected growing concerns over the outlook for energy, healthcare and litigation services, all of which have historically been heavy users of specialty consulting services.

After a substantial number of new private equity investments into the Business Services sector during the first three quarters 2015, the fourth quarter saw a wave of strategic consolidation. In particular, acquisitions of data-based companies and information services businesses remained especially active while traditional HR and Outsourcing sectors experienced reduced activity.

Notable merger and acquisition transactions during the quarter included:
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