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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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Capital Restructuring | Second Quarter 2017

August 2017 – Moody’s and S&P both reported a 3.8% default rate at the end of the Second Quarter 2017. Moody’s expects that the media and retail sectors will see the highest default rates in the coming 12 months. Both credit rating agencies forecast a drop in the default rate in the foreseeable future, with Moody’s expecting the default rate to close the year at 3.1%, and S&P expecting the default rate to decrease to 3.3% by March 2018.

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Industrial Growth | Second Quarter 2017

August 2017 – During the second quarter, returns for the industrials sector in the equity capital markets continued their expansion momentum with the majority of the subsectors followed by SCA generating positive returns after a tumultuous six months of the Trump presidency. The Analytical Instrumentation & Testing Equipment subsector led the industry with a quarterly return of +12.4%, compared with the S&P 500 quarterly return of +2.7%. Other industry subsectors with notable positive quarterly growth include Plastics & Packaging +10.2% and Electronics & Components +5.0%.

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Business Services | Second Quarter 2017

July 2017 – For the second quarter of 2017, the SCA Business Services Index increased by 5.4% compared with an increase of 7.7% 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, the IT Services and IT Consulting sectors were up over 6%, while Marketing Services and HR services both underperformed the S&P 500. Despite some concerns about weaker than expected economic growth in the second half of 2017, investors remain generally bullish on all types of technology enabled service offerings.
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Healthcare Services | Second Quarter 2017

July 2017 – Deal volume in healthcare M&A for Q2 2017 totaled 365 transactions, 14% lower than the same period in 2016 and 15% lower than the preceding quarter, according to preliminary figures from Irving Levin Associates Inc. Deal value in Q2 2017 totaled $99.8 billion, up 70% compared with Q1 2017, and 13% higher than the same period a year earlier. However, one deal accounted for approximately 25% of the quarter’s total involving medical device company Becton, Dickinson & Co.’s (NYSE: BDX) announced acquisition of C.R. Bard, Inc. (NYSE: BCR) in April for $24 billion.
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Capital Restructuring | First Quarter 2017

May 2017 – Default rates reported by both Moody’s and S&P approximated 4%-5% at the end of the First Quarter 2017. Moody’s expects that the retail sector will become the most troubled sector during the year. Both Moody’s and S&P forecast that the default rate will drop at the end of the year to 3.0% and 3.9%, respectively.

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Industrial Growth | First Quarter 2017

May 2017 – During the first quarter, returns for the industrials sector in the equity capital markets continued to rapidly expand with the majority of the subsectors followed by SCA generating positive returns after the much-anticipated Presidential election. The Analytical Instrumentation & Testing Equipment subsector led the industry with a quarterly return of +14.1%, compared with the S&P 500 quarterly return of +5.5%. Other industry subsectors with notable positive quarterly growth include Electronics & Components +7.7%, and Chemicals +7.4%. M&A activity for the quarter slightly increased compared to Q4 2016 with 258 transactions announced versus 220 deals last quarter; deal value lagged at $14.6 billion compared to $18.1 billion last quarter.

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Business Services | First Quarter 2017

May 2017 – For the first quarter of 2017, the SCA Business Services Index increased by 3.7% compared with an increase of 4.7% for the S&P 500. While the Business Services sector as a whole underperformed the broader market, several sub-sectors outperformed the overall market. In particular, IT Services was up over 8% and Staffing and HR Services was up 5.4%, while Marketing Services was in line with the S&P 500. Despite growing uncertainty around the legislative environment in Washington, each of these sectors is perceived to be well positioned to benefit from deregulation and accelerating business investment with temporary staffing reaching an all-time high penetration rate of 2.054% in March 2017.
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Healthcare Services | First Quarter 2017

May 2017 – Deal volume in healthcare M&A for the first quarter of 2017 totaled 395 transactions, 6% higher than the same period in 2016 and 7% higher than the preceding fourth quarter in 2016, according to preliminary figures from Irving Levin Associates Inc. This quarter’s deal volume sets a new record for all Q1 deal volume. Spending on deals was not as robust with $58.7 billion in Q1 2017, a 27% decrease from the same period a year prior, but 56% higher than the fourth quarter of 2016.
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Industrial Growth | Fourth Quarter 2016

March 2017 – During the fourth quarter, returns for the industrials sector in the equity capital markets improved substantially with all of the subsectors followed by SCA generating positive returns after the much-anticipated Presidential election. The Metals subsector led the industry with a quarterly return of +28.8%, compared with the S&P 500 quarterly return of +3.6%. Other industry subsectors with notable positive quarterly growth include Resource Recovery & Waste Management +12.1%, Precision Machine Products +11.1%, and Analytical Instrumentation & Testing Equipment +6.4%. M&A activity for the quarter slightly increased compared to Q3 2016 with 220 transactions announced versus 216 deals last quarter; deal value was also significantly less at $18.1 billion compared to $20.8 billion last quarter.

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Business Services | Fourth Quarter 2016

March 2017 – For the fourth quarter of 2016, the SCA Business Services Index increase by 2.99% consistent with an increase of 3.59% for the S&P 500. The Business Services sector, like the overall market, was driven by investors’ post-election expectations for accelerating growth under the new administration. In particular, staffing and HR Services, Specialty Consulting and Marketing Services were all trading at near 52-week highs at the end of 2016, as the sectors were poised to benefit from increased hiring and investing from small and mid-sized businesses.
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Capital Restructuring | Fourth Quarter 2016

February 2017 – 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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Healthcare Services | Fourth Quarter 2016

January 2017 – Deal volume in healthcare M&A in 2016 totaled 1,536 transactions, 1% higher than 2015, the first year to break 1,500 transactions, according to preliminary figures from Irving Levin Associates. Inc. Spending on deals in 2016 was robust. Deal value in 2016 totaled $255.7 billion, representing a 36% decrease from 2015’s total of $400.3 billion (including $91.2 billion in managed care deals that may dissolve by the end of January, depending on the outcome of federal court challenges).
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Industrial Growth | Third Quarter 2016

November 2016 – During the third quarter, returns for the industrials sector in the equity capital markets drastically improved, with all but one of the subsectors followed by SCA generating positive returns. M&A activity for the quarter decreased compared to Q2 2016 with 216 transactions announced versus 249 deals last quarter; deal value was also significantly less at $20.8 billion compared to $99.8 billion last quarter predominantly due to the announced $65 billion merger between Bayer AG and Monsanto Company in the Chemicals (fertilizers and agricultural) sector in Q2 2016.

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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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