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Business Services | Fourth Quarter 2020

February 2021 – Despite a second wave of COVID-19 cases and associated shutdowns and restrictions, the SCA Business Services Index increased by 21.8% in Q4 2020, significantly above the 7.9% increase in the S&P 500, as excitement about a vaccine fueled hope that a return to pre-pandemic business activity levels would be possible in 2021.

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Healthcare Services | Fourth Quarter 2020

January 2021 – Despite unprecedented challenges in 2020, healthcare M&A activity did not decline as sharply as predicted during the pandemic, even rebounding in the second half of the year and in December, setting an all-time high number of transactions of 222 for the month, according to preliminary figures from Irving Levin Associates Inc. Transaction value in Q4 2020 was approximately $118.2 billion, more than double the transaction value of $52.1 billion in Q4 2019. The surge in healthcare M&A in Q4 2020 was likely driven by a number of factors, but one of the most notable is the availability of a COVID-19 vaccine, notwithstanding the challenging rollout.

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Capital Restructuring | Fourth Quarter 2020

January 2021 – At the end of 2020, Moody’s and S&P reported default rates of 8.4% and 6.6%, respectively. According to S&P, a second wave of COVID-19 infections and further economic restrictions remain risks. Both credit agencies forecast default rates to rise to about 9.0% in 2021.

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Capital Restructuring | Third Quarter 2020

November 2020 – At the end of Third Quarter 2020, Moody’s and S&P reported default rates of 9.0% and 6.2%, respectively. According to S&P, about 70% of corporate defaults are in four sectors: consumer products, oil and gas, retail and restaurants, and media and entertainment sectors. Default rates in 2021 are forecast to rise sharply to 12.0% (Moody’s: February 2021) and 12.5% (S&P: March 2021). The unprecedented pace at which funding markets normalized in 3Q2020 mitigated initial fears of elevated defaults.

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Business Services | Third Quarter 2020

November 2020 – The SCA Business Services Index increased by 4.9% in Q3 2020, compared to a 16.5% increase in the S&P 500. While most Business Services sectors experienced a level of stabilization during the quarter, almost every area is adapting to a “new normal” in which year-over-year sales are expected be down anywhere from 15% to more than 50% as compared to 2019. A recent survey by Staffing Industry Analyst reported temporary staffing revenues are expected to decline by 17% in 2020 with several subsectors down over 30%. Similarly, a recent survey by Chief Marketer projected corporate marketing budgets being reduced by 50% as companies eliminate corporate entertaining, tradeshows, and even elements of digital advertising. A bright spot remains in IT spending, as companies invest in enhanced infrastructure to facilitate expanded ecommerce, virtual customer meetings and work from home employees.

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Healthcare Services | Third Quarter 2020

October 2020 – Deal volume in Q3 2020 remained flat compared with the prior quarter with 342 transactions announced, but down 25% from the same quarter a year earlier, according to preliminary figures from Irving Levin Associates Inc. Hospital transaction volume fell by more than 50% in Q3 2020 to 10 deals and $207 million, respectively, as compared to the same quarter a year prior. Two bright spots were the Home Health & Hospice and Telemedicine sectors, which have seen an increase in demand in the post COVID environment.

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Industrial Growth | Third Quarter 2020

October 2020 – During Q3 2020, equity capital market returns for SCA’s Industrial Sector Growth Index experienced considerable growth (+8.8%) alongside the broader the S&P (+15.1%) and NASDAQ (+0.3%) indices over the same time period. The index experienced positive results across six of the seven subsectors for the quarter, with notably strong performance driven by Electronics & Components (+14.4%), Analytical Instrumentation & Testing Equipment (+12.2%), and both Plastics & Packaging and Resource Recovery & Waste Management (+10.2%).

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Capital Restructuring | Second Quarter 2020

August 2020 – At the end of Second Quarter 2020 Moody’s and S&P reported default rates of 7.3% and 5.3%, respectively. According to Moody’s, companies with eroding liquidity will push defaults higher in 2021 while debt recoveries will be lower than during previous recessions. Default rates in 2021 are forecast to rise to 10.5% (Moody’s: July 2021) and 12.5% (S&P: March 2021).

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Business Services | Second Quarter 2020

August 2020 – The SCA Business Services Index experienced a modest recovery in Q2 2020, increasing by 24% from its multi-year low after the start of the pandemic in March 2020. However, most subsectors of Business Services remain significantly below their Q4 2019 levels, as the outlook for recovery during the second half 2020 remains highly uncertain. In particular, demand for professional staffing (-24.6% YTD), marketing services (-34.6% YTD), and HR services (-13.3% YTD) remains significantly depressed with businesses across almost all industry sectors operating substantially below pre-pandemic levels.

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Industrial Growth | Second Quarter 2020

August 2020 – During Q2 2020, equity capital market returns for SCA’s Industrial Sector Growth Index experienced considerable growth (+24.7%) alongside the broader the S&P (+8.1%) and NASDAQ (+26.2%) indices over the same time period. The index experienced positive results across all seven subsectors for the quarter, with notably strong performance driven by Chemicals (+38.5%), Analytical Instrumentation & Testing Equipment (+29.5%) and both Electronics & Components and Precision Machine Products (+25.1%).

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Healthcare Services | Second Quarter 2020

July 2020 – As the first full quarter following the COVID-19 pandemic, M&A transactions declined precipitously. Compared with Q1 2020, Q2 2020 M&A transaction volume dropped 20%, with 322 transactions, according to preliminary figures from Irving Levin Associates Inc. Compared with Q2 2019 (486 transactions), M&A transaction volume in Q2 2020 declined even further at 34%. The Long-Term Care and Physician Medical Group sectors were among the hardest hit, declining 40% and 50% in M&A transaction volume compared with Q1 2020, respectively. Year-over-year, Long-Term Care M&A transactions declined 50% compared with Q2 2019, and Physician Medical Groups fell 63%.

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Capital Restructuring | First Quarter 2020

May 2020 – By the end of 2020, Moody’s and S&P are projecting default rates of 13.4% and 10.0%, respectively, levels not seen since 2009. According to Moody’s, the deterioration in credit conditions is the result of the confluence of the coronavirus outbreak, falling oil prices, and mounting recessionary conditions, which combined have created severe and extensive credit shocks across many sectors.

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Business Services | First Quarter 2020

May 2020 – After outperforming the broader markets during the first two months of 2020, the SCA Business Services Index was significantly impacted by the COVID-19 economic lockdowns, declining by 25.7% for the First Quarter of 2020. While all sectors of Business Services experienced material declines, the Professional Staffing sector was particularly impacted, with the index of public staffing companies declining by one-third as companies across all industries furloughed employees at all levels.

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Healthcare Services | First Quarter 2020

May 2020 – With 359 healthcare M&A transactions in Q1 2020, there was a 25% drop in transaction activity compared with the prior quarter and a 12% decline from the same period a year ago, according to preliminary figures from Irving Levin Associates Inc. Physician Medical Groups and Hospitals experienced the largest declines in M&A transaction activity. Physician Medical Groups M&A transactions in Q1 2020 declined precipitously, falling 57% compared with Q4 2019 and 39% from the same period a year prior and Hospital M&A transactions dropped 38% quarter-over-quarter, as well.

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Industrial Growth | First Quarter 2020

May 2020 – During Q1 2020, equity capital market returns for SCA’s Industrial Sector Growth Index experienced substantial losses (-29.5%) alongside the broader the S&P (-14.2%) and NASDAQ (-32.6%) indices over the same time period. The index experienced negative results across all seven subsectors for the quarter, with notably weak performance driven by Metals (-39.2%), Precision Machine Products (-37.7%), and Chemicals (-32.5%).

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