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Business Services | Second Quarter 2022

August 2022 – This issue of SOLIConnect includes a discussion with regard to the composition of M&A activity during Q2 2022, which was characterized by a mix of strategic consolidation as well as a number of high profile platform transactions by leading private equity firms.

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Industrial Growth | Second Quarter 2022

July 2022 – This issue of SOLIConnect includes a discussion about the 25% increase in M&A activity in the Industrial sector, despite challenging market conditions.

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Healthcare Services | Second Quarter 2022

July 2022 – This issue of SOLIConnect includes a discussion about the growth in behavioral health services, one of the most sought-after sectors in healthcare services M&A.

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Capital Restructuring | First Quarter 2022

May 2022 – This First Quarter of 2022 issue of SOLIConnect reflects on current and prospective late expansion market indicators impacting the outlook for credit and leveraged loan markets, including rising interest rates, inflation, supply chain challenges, and ongoing looseness of credit terms.

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May 2022 – With healthcare M&A activity continuing to set records in First Quarter of 2022, this issue of SOLIConnect discusses recovery from the pandemic disruption and its impact on the industry and various sectors.

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Industrial Growth | First Quarter 2022

April 2022 – The SOLIC Industrial Sector Growth Index (“SISG Index”) declined (-2.7%) as compared to the broader S&P (-4.9%) and NASDAQ (-9.7%) indices over the same period, and experienced negative results across six of the seven subsectors – Metals was the only subsector to experience positive results. The Industrial sector’s capital markets performance relative to the previous quarter was due to the following interlinked drivers: spikes in certain commodities prices and ongoing supply chain constraints, exacerbated by the Russian invasion of the Ukraine, and the Fed’s signaling of prospective rate increases to combat rampant inflation, adversely impacting margins in a majority of the subsectors.

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Business Services | First Quarter 2022

April 2022 – The SOLIC Business Services Sector Index (“SBSS Index”) declined by 8.2% during Q1 2022 compared to a 4.9% decline by the S&P 500, reflecting growing investor uncertainty about the impact of the war in Ukraine, record inflation and rising interest rates. Several Business Services sub-sectors, however, either outperformed or were in line with the overall market during the quarter. Stocks for Specialty Consulting Services (-2.5%), HR Services (-5.1%) and Professional Staffing (-6.3%) reflected continued strong demand for labor supply and HR recruiting services given the historical tight labor market. Marketing Services (-5.3%) continues to experience strong demand as companies of all sizes seek to employ new digital tools to attract and retain customers.

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Capital Restructuring | Fourth Quarter 2021

February 2022 – With distressed indicators reaching a multi-year low during the Fourth Quarter of 2021, this issue of SOLIConnect discusses the possibility that debt markets are at a tipping point with the prospect of rising interest rates and inflation.

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Business Services | Fourth Quarter 2021

January 2022 – The SOLIC Business Services Sector Index (“SBSS Index”) rose 8.7% in Q4 2021, consistent with the 9.4% increase for the S&P 500. While the Business Services sector overall was consistent with broader markets, there was significant divergence within subsectors. The IT Consulting index was up by over 24% and the HR Services index increased by 18.3%, led by payroll companies such as ADP and Paychex and the view that such companies would benefit from accelerating employment in 2022 as well as rising interest rates. On the other side, the Professional Staffing Index was up only 1.9% during the quarter, representing a pull back after record appreciation during the first half of 2021.

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Healthcare Services | Fourth Quarter 2021

January 2022 – Healthcare M&A activity in 2021 was a record-breaking year with more than 2,100 transactions, totaling more than $456 billion in announced M&A deal value, according to preliminary figures from Irving Levin Associates Inc. Transactional growth was achieved across almost all sectors and buyers ranged from small local investors to international private equity and venture capital firms. Significant drivers of deal activity include: (i) demographic changes, resulting in an older population requiring increased utilization of home health and hospice services and personalized physician care, (ii) the rise of substance use disorders and stress from the COVID-19 pandemic, and (iii) the shift to value-based care, pushing providers to adopt patient engagement and care coordination solutions. Due to rising demand, even with COVID still impacting the U.S. economy, investors, both strategic and financial, seek to capitalize on the robust healthcare market. The year saw sharply higher deal growth in the physician practice, digital health, diagnostics, and distribution sectors.

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Industrial Growth | Fourth Quarter 2021

January 2022 – The SOLIC Industrial Sector Growth Index (“SISG Index”) increased 8.0% as compared to the broader S&P (+8.9%) and NASDAQ (-4.0%) indices over the same period, and experienced positive results across six of the seven subsectors. The Industrial sector’s capital markets performance relative to the previous quarter was due to spikes in certain commodities prices and ongoing supply chain constraints, adversely impacting margins in certain subsectors.

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Capital Restructuring | Third Quarter 2021

November 2021 – At the end of third quarter 2021, Moody’s and S&P reported default rates of 2.5% and 2.4%, respectively. Low levels of loan default rates are expected well into 2022 with almost all near-term indicators of future defaults suggesting a lower default rate ahead, with credit metrics stabilizing, continued favorable lending conditions, and a strong economic rebound anticipated into next year.

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Business Services | Third Quarter 2021

November 2021 – After rising over 13% through Q2 2021, the SOLIC Business Services Sector Index (“SBSS Index”) was essentially flat during Q3 2021, increasing 0.7% in Q3 2021 compared to a 6.6% increase for the S&P 500. In particular, concern over the growing impact of the delta variant, along with rising inflation and supply chain challenges, caused stocks of services-related businesses to pull back in August and September. Stocks of Marketing Services (-11.5%) and Professional Staffing (-5%) experienced the greatest pullback in Q3, while IT Consulting (+8.4%), Specialty Consulting (+4.8%) and Information Services (+4.5%) experienced the strongest performance.

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Healthcare Services | Third Quarter 2021

October 2021 – Healthcare M&A activity in Q3 2021 continued its record pace started in Q1 2021. According to preliminary figures from Irving Levin Associates Inc., healthcare M&A transaction volume reached 590 deals, up slightly from the previous quarter and 1.5x the same quarter a year prior. The M&A environment is projected to remain robust due to a combination of sellers’ desire to close transactions before a possible increase in capital gains tax next year, an abundance of dry powder from private equity, and a large, fragmented healthcare market to deploy capital. Although some headwinds are on the horizon — including inflation and the possibility of interest rate hikes next year — dealmakers are, so far, undeterred. Transaction activity was robust in all sectors, but was particularly strong in physician services, post-acute care health systems, and healthcare technology.

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Industrial Growth | Third Quarter 2021

October 2021 – The SOLIC Industrial Sector Growth Index (“SISG Index”) decreased 2.3% as compared to the broader S&P (+6.6%) and NASDAQ (+1.5%) indices over the same period, and experienced positive results across three of the seven subsectors. The Industrial sector’s capital markets performance relative to the previous quarter was due to spikes in certain commodities prices and ongoing supply chain constraints, adversely impacting margins in certain subsectors.

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Industrial Growth | Second Quarter 2021

August 2021 – The SOLIC Industrial Sector Growth Index (“SISG Index”) increased 3.7% as compared to the broader S&P (+17.6%) and NASDAQ (+18.7%) indices over the same period, and experienced positive results across six of the seven subsectors. The Industrial sector’s capital markets performance relative to the previous quarter was due to significant recovery from the global outbreak of the COVID-19 virus.

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Capital Restructuring | Second Quarter 2021

August 2021 – At the end of second quarter 2021, Moody’s and S&P reported default rates of 4.1% and 4.7%, respectively, with both credit agencies forecasting default rates to fall to 1.6% (Moody’s by December 2021) and 4.0% (S&P by March 2022). S&P reports that near-term indicators of future defaults suggest a lower default rate ahead, with credit metrics stabilizing, vaccinations proceeding at a solid pace, favorable lending conditions, and a strong economic rebound expected to continue in the second half of this year.

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Healthcare Services | Second Quarter 2021

July 2021 – Healthcare M&A activity in Q2 2021 continued on its record pace which began in Q1 2021. According to preliminary figures from Irving Levin Associates Inc., healthcare M&A transaction values reached $126.1 billion, a 38% increase from the $91.3 billion in Q1 2021 and almost 10x the transaction value in Q2 2020. Transaction activity was robust in all sectors, but was particularly strong in physician services, post-acute care and health systems.

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Business Services | Second Quarter 2021

July 2021 – The SOLIC Business Services Sector Index (“SBSS Index”) was up 5.5% in Q2 2021, an impressive performance for most quarters, but significantly below the 18% increase in Q2 experienced by the S&P 500, which was lifted by a strong rebound in energy, financial and hospitality/leisure stocks as the sectors rebounded. The SBSS Index was led by Information Services (+11.1%), Professional Staffing (+9.0%), Business Process Outsourcing (+8.8%), and Marketing Services (+5.5%) reflecting strong demand for labor and operational support as businesses seek to return to pre-pandemic activity.

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Business Services | First Quarter 2021

May 2021 – After nine months of uncertainty and unprecedented disruption related to COVID-19, investor demand for Business Services related investments surged in Q1 2021, as expectations of a rapid economic recovery from the vaccine roll-out fueled an outlook for rapid growth in the sector. The SOLIC Business Services Sector Index (“SBSS Index”) was up 7.5% in Q12021 compared to an increase of 1.6% for the S&P 500. Virtually all industry sub-sectors of the SBSS index outperformed the broader markets as investors bet that companies will need to make significant use of outsourced service providers as they reopen and adjust to employee and customer dislocations from the past year.

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Capital Restructuring | First Quarter 2021

May 2021 – At the end of first quarter 2021, Moody’s and S&P reported default rates of 7.5% and 6.3%, respectively, with defaults led by the oil and gas, media and entertainment, and retail sectors. Both credit agencies forecast default rates to fall to 3.9% (Moody’s) and 5.5% (S&P) by year end, with S&P citing strong economic data and forecasted growth during 2021. Credit portfolio risks in the event default rates are driven higher are primarily expected to be the increase in U.S. Treasury yields this year and its impact on the rate environment, pandemic-related drivers, credit quality, and potential inflation. Many investors are looking at the loan market as a barometer of credit conditions.

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Industrial Growth | First Quarter 2021

May 2021 – Q1 2021 Equity Capital Market Returns: The SOLIC Industrial Sector Growth Index (“SISG Index”) increased 20.9% as compared to the broader S&P (+1.6%) and NASDAQ (+4.8%) indices over the same time period, and experienced positive results across all seven subsectors. The Industrial sector’s capital markets performance relative to the previous quarter was due to significant recovery from the global outbreak of the COVID-19 virus.

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Healthcare Services | First Quarter 2021

May 2021 – The recovery in equity capital markets, rollout of COVID-19 vaccine programs, supportive central bank monetary policy and robust access to capital available to private equity (PE) investors and special purpose acquisition companies (SPACs) all point to a rebounding M&A market in 2021. According to preliminary figures from Irving Levin Associates Inc., healthcare M&A transactions totaled 596 in Q1 2021, a 17% increase from the prior quarter, with almost $90 billion in total transaction value.

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Industrial Growth | Fourth Quarter 2020

February 2021 – During Q4 2020, equity capital market returns for SCA’s Industrial Sector Growth Index experienced considerable growth (+22.2%) alongside the broader S&P (+7.9%) and NASDAQ (+40.5%) indices over the same time period as forward-looking investor sentiment grew highly optimistic with industrial demand. More specifically, the index experienced positive results across six of the seven subsectors for the quarter, with notably strong performance driven by Metals (+40.1%), Precision Machine Products (+35.1%) and Analytical Instrumentation & Testing Equipment (+22.5%).

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