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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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Capital Restructuring | Fourth Quarter 2019

February 2020 – At the end of 2019, Moody’s and S&P reported default rates of 4.2% and 3.1%, respectively. According to S&P, the oil and gas sector and retail and restaurant sector led defaults in 2019. Moody’s expects the default rate to moderate to 3.5% by the end of 2020, assuming no severe deterioration in their macroeconomic assumptions, while S&P forecasts the default rate to rise to 3.9% by September 2020.

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Industrial Growth | Fourth Quarter 2019

February 2020 – During Q4 2019, equity capital market returns for SCA’s Industrial Sector Growth Index gained 6.6% while lagging both the S&P (+9.9%) and NASDAQ (+13.5%) indices over the same time period. The index experienced healthy results across all seven sectors throughout Q4, with notable performance in the index driven by Precision Machine Products (+15.7%) and Electronics & Components segments (+14.7%).

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Healthcare Services | Fourth Quarter 2019

January 2020 – Overall Healthcare Services M&A activity remained strong in 2019, with non-asset based services continuing to attract broad investor attention. According to preliminary figures from Irving Levin Associates Inc., 1,774 deals were announced in 2019, the second-highest on record with aggregate value of $401.7 billion beating the previous record in 2018 by 21%. Healthcare M&A remained robust across a number of sectors including acute care, post-acute care, physician practice management, behavioral health, managed care, and healthcare IT.

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Capital Restructuring | Third Quarter 2019

November 2019 – At the end of Third Quarter 2019, Moody’s and S&P reported default rates of 3.2% and 2.8%, respectively. While forecasts are that heightened levels of defaults are unlikely to occur in the next 12 months, defaults could challenge the last cycle peak if conditions deteriorate quickly, largely due to the record volume of single-B rated debt.

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Industrial Growth | Third Quarter 2019

November 2019 – During Q3 2019, equity capital market returns for SCA’s Industrial Sector Growth Index fell 4.2% and lagged both the S&P (+0.4%) and NASDAQ (-1.1%) indices over the same time period. The index experienced underwhelming results across six of its seven sectors throughout Q3, and positive performance in the index was driven solely by the Resource Recovery & Waste Management segment (+0.4%).

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Business Services | Third Quarter 2019

November 2019 – For the Third Quarter of 2019, the SCA Business Services Index increased by 1.0%, inline with the S&P 500 which rose 0.5%. Most sectors in Business Services including HR Services, Marketing Services, and Professional Staffing underperformed the broader market, as investors became increasingly concerned about the prospect of a slowing economy and its impact on slowing demand for staffing and HR related services. One sector that did outperform was Specialty Consulting which was up over 15.6% for the quarter as investors anticipated increased demand for restructuring services, as well as potential consolidation in the sector.

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Healthcare Services | Third Quarter 2019

November 2019 – The pace of healthcare M&A transaction activity in 2019 remained steady in Q3 with 396 announced transactions, although volume was down 15% from the previous quarter and 17% from the same period a year prior, according to preliminary figures from Irving Levin Associates Inc. Healthcare services transactions represented 66% of Q3 total deal volume, similar to the previous four quarters. Combined spending in Q3 2019 totaled $51.5 billion, down 63% compared with the previous quarter’s extraordinary $139.1 billion, but 65% greater than the $31.1 billion reported in the same quarter in 2018.

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Industrial Growth | Second Quarter 2019

August 2019 – During the Q2 2019, equity capital market returns for SCA’s Industrial Sector Growth Index fell 3.5%. The Q2 index performance lagged the S&P (+2.6%) and NASDAQ (+2.3%) indices over the same time period. The index saw mixed results throughout Q2, and growth in the index was driven by significant increases in the Analytical Instrumentation and Equipment Testing (+13.2%), Precision Machine Products (12.7%) and Resource Recovery and Waste Management (+9.3%) segments.

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Business Services | Second Quarter 2019

August 2019 – For the second quarter of 2019, the SCA Business Services Index increased by 2.9%, slightly ahead of the S&P 500, which rose 2.6%. Most sectors in Business Services including HR Services, Marketing Services, and Professional Staffing generally performed inline with the broader market, as investors overcame concerns about the prospect of a slowing economy and focused on Fed guidance of a rate cut and strong employment data. Of particular note was the performance of the Information Services sector which includes a broad range of proprietary data service providers such as CoStar, Equifax, Fair Isaac, and Gartner. The companies have continued to show strong earnings growth as their data becomes increasingly imbedded in AI decision tools for a broad range of businesses.

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