Strategic Market Insights

PNC’s advisory and specialty businesses offer valuable insights and perspective on this quarter’s market trends.

3Q 2020 Trends & Outlook

M&A Market Executive Summary

  • During recent economic disruptions, M&A volume had already started to decrease in advance of the downturn, driven in part by late-cycle market dynamics — yet it recovered quickly when economic conditions improved (see figure below).

Real GDP Growth vs. No. of U.S. M&A Transactions

Sources: Refinitiv, U.S. Bureau of Economic Analysis, WallStreet Research /  View Accessible Version of this chart.

  • The small and mid-sized end of the M&A market has generally shown lower volatility during economic disruptions than the mega-deal segment.
  • Between 2008 and 2009, closed transactions tended to involve large corporate buyers and readily attained synergies, buyers able to adjust financial structures, highly targeted sales processes, and smaller deals involving founder-owned businesses, tuck-ins and spin-offs.
  • Generally speaking, deals that closed in 2010 tended to involve private equity-to-private equity sales of well-run businesses, assets key to the core goals of large corporate buyers, family businesses seeking exit, companies successful at predictable growth, and thinly traded small and mid-cap public companies. We expect similar trends and patterns to occur during the recovery from the current recession.
  • For more details, please review Looking Back to Go Forward: What Past Economic Cycles Can Teach Us About M&A in 2020 and Beyond.

IPO & Follow-On Executive Summary

  • The S&P 500 dropped 33% in 1Q in light of the COVID-19 pandemic; however, this was followed by a sharp 40% 2Q rise, marking the biggest quarterly gain since 1998 and the largest 100-day rally since 1933 (though still leaving the market down 4% YTD). The rapid recovery from the March bottom was largely driven by unprecedented Fed liquidity measures and hopes of an economic rebound.

Indexed Market Performance Amidst Recent Notable Dislocations

View Accessible Version of this chart.

  • In the face of COVID-19, 2Q witnessed a market re-opening characterized by creativity, large scale capital raises and the eventual re-emergence of monetizations and strong IPO activity. Equity issuance commenced in early April led by convertible offerings and marketed follow-ons for companies in need of capital, followed by issuance of secondary shares and then the return of strong IPO activity in June, resulting in an astounding +88% year-over-year increase in overall equity proceeds.
  • Select sectors have shown signs of optimism about the opportunities that lie on the other side of COVID-19, but a great deal of volatility is expected as long as COVID-19’s duration and impact remain unknown and corporate earnings visibility is lacking. Institutional investors have been anxious to consider new businesses in this environment, but are quick to expose any weaknesses in the business model given an uncertain outlook.
  • Traditional ECM playbooks have evolved in light of recent events with analyst days and roadshows moving entirely to a virtual setting along with condensed marketing processes and an increasing import on “testing the waters” activities. The first wave of IPOs to come to market have been hand-selected and have found terrific success. As a more diverse set of companies attempt to come to the IPO market, it is not yet clear whether the innovative tactics that were well-suited for the initial group of IPO issuers will be as effective as the universe of issuers begins to expand.

View Accessible Version of this graphic.

  • The second half of the 2020 calendar is likely to get crowded with the upcoming presidential election, which may add a layer of volatility and uncertainty as election-year rhetoric contributes to investor angst leading into the November election.

Annual IPO and Follow-On Issuance

Sources: Dealogic and Factset / View Accessible Version of this chart.

Debt Capital Markets Executive Summary

  • Investment Grade Loans: During the worst of the COVID-19 market disruption, loan spreads gapped out 50-75 bps from pre-COVID-19 levels of L+75-150, and tenors shrunk to within three years, over 90% of which were 364 day liquidity facilities. More recently, spreads have begun to tighten and are trending back to L+100-175; LIBOR floors continue to be a point of discussion; and while floors remain conventional in the market, the levels of the floors have reduced and certain deals have cleared at 0%. Upfront fees are at a premium, particularly on 5 year deals, currently ranging from 3-7 bps per year of tenor. 

Borrowers Looked to Banks for Liquidity: COVID-19-Related Liquidity Financings

View Accessible Version of this chart.

  • Investment Grade Bonds: Despite record first half volume of $1.2 trillion (~107% of all 2019), market conditions remain favorable for issuers heading into the second half of the year. Although most issuers have fulfilled their current financing needs, we expect borrowers to opportunistically tap the market to manage upcoming maturities given the attractive all-in yield environment and continued support from the Fed. Deal execution has returned to pre-COVID-19 levels with negligible new-issue concessions and strong order book subscriptions.

Record Bond Volume: IG Volume in 1H20 Surpassed 2019 Total

View Accessible Version of this chart.

  • Middle Market: Market receptivity is open and growing, driven by banks' declining loan balances and an anemic supply of new deal opportunities. The key focus for banks continues to be returns, and the second half of the year will see lenders scrutinizing ancillary business in parallel with capital commitments. Lenders are trying to hold onto LIBOR floors when possible, which range from 0 to 50-75 bps on a case-by-case basis, down from as much as 100 bps.
  • Asset-Based Lending: The asset-based loan market continues to be an attractive source of capital during the COVID-19 pandemic for companies that are looking for structural flexibility, specifically as it relates to potential leverage covenant concerns in existing cash flow facilities. Spreads widened 50-75 bps from pre-COVID-19 levels but seem to have settled in at that range. LIBOR floors of 50 bps are the norm. While deal flow from M&A and refinances are down, investor demand is robust, and a number of borrowers in the retail industry launched transactions.
  • Leveraged Pro Rata: For Revolver / Term Loan A facilities, new deals are 100-150 bps wide of pre-COVID-19 levels of L+150-250 and have limited deal flow. Opportunistic refinances at competitive pricing are still off the table at present. Maturity-extension transactions may see an upfront fee with no or modest change to the pricing grid. However, a brand new deal may have to price higher depending on the construct of the bank group, particularly if new relationship banks will be needed to complete the syndication.
  • Institutional Loans / High Yield: The Leveraged Loan Index saw TLBs trade at ~76% of par at the March low before recovering to approximately ~90% of par in June. While the risk of further fundamental, default, credit downgrade and pandemic disruptions weigh on investors’ minds, loan market technicals actually lean bullish: The new-issue forward calendar sits at less than $20 billion versus $30 billion to $60 billion pre-COVID-19, limiting supply, and CLOs have begun to price new transactions, creating new buying demand. At the right spread and OID, even some double B and single B borrowers in harder-hit industries are able to raise capital. In high yield, after a hard sell-off in March, the Fed’s significant and unprecedented support caused prices to rally and spreads to compress. June and May set the #1 and #2 monthly volume records of all-time. Looking forward, the market is re-opened to issuers.  

Sources: PNC Capital Markets LLC, S&P Capital IQ LCD, Thomson Reuters Refinitiv, Informa Global Markets, Credit Flow Research

Recent Transactions

Harris Williams

M&A Advisory

  • Harris Williams recently advised H.I.G. Capital’s investment affiliate, H.I.G. Advantage, on its acquisition of Supply Source Enterprises, Inc. (SSE) from Genuine Parts Company. SSE is a leading manufacturer of branded and private label personal protective equipment and janitorial, safety, hygiene and sanitation products.
  • Harris Williams advised The Retina Group of Washington (RGW) on its transaction with PRISM Vision Group, a portfolio company of Quad-C. RGW is a leading provider of retinal and macular care in the greater Washington, D.C., Maryland and Virginia region and, as part of the PRISM network, will be the platform practice for building a vertically integrated eye care network in the region.
  • Harris Williams recently advised ATP, a premier global provider of information services and software solutions within the aviation industry, on its acquisition of Flightdocs. Flightdocs is a leading provider of aircraft maintenance tracking and inventory management solutions within business aviation.
  • Harris Williams advised Capital plc, a consulting, transformation and digital services business, on the sale of Eclipse Legal Systems (Eclipse) to The Access Group. Eclipse is a leading mid-market case, matter and practice management software provider operating primarily in the U.K. legal market.

Solebury Capital

IPO/Block Trade Advisory

  • In the first half of 2020, Solebury advised on a large and diverse set of transactions, totaling $30.6 billion in proceeds:
    • Through a weekend wall-cross and a two-day marketing campaign, Solebury Capital advised on the $14.4 billion follow-on of Blackrock (inclusive of a $1.1 billion repurchase), the largest follow-on offering since 2012. For context, over the last 20 years, this transaction represents the second largest 100% secondary follow-on, fourth largest follow-on and seventh largest equity offering.
    • Solebury Capital advised on the $1,075 million IPO for ZoomInfo, a go-to-market intelligence platform for sales and marketing teams, offering a cloud-based platform. The transaction represented the largest software IPO in the last decade and the second most highly valued software IPO in history.
    • Solebury Capital advised on the $656 million IPO for SelectQuote, a leading technology-enabled distribution platform that provides consumers with a convenient venue to shop for complex senior health, life and auto and home insurance policies. The transaction represented the first non-biotech IPO during the COVID-19 pandemic and went on to trade up 35% on the first day of trading and finished up 28% above offer 30 days post-IPO.
  • Read more about how Solebury has been at the forefront of reopening the markets post-COVID-19.

PNC Debt Capital Markets


  • American Electric Power: PNC Bank, National Association (“PNC”) acted as Administrative Agent and PNC Capital Markets LLC (“PNCCM”) as Joint Lead Arranger on AEP’s new $1 billion Term Loan used for general corporate purposes.
  • Wabtec: PNC acted as Administrative Agent and PNCCM as Joint Lead Arranger on Wabtec’s $600 million of facilities, split between a $456 million 364-Day Term Loan and $144 million 364-Day Revolver utilized for general corporate purposes.
  • PPG: PNCCM served as Lead Left and PNC as Administrative Agent on PPG’s $1.5 billion 364-Day Term Loan Facility primarily used for general corporate purposes.
  • Piedmont Natural Gas Co. & Duke Energy Ohio: PNCCM served as Global Coordinator and Active Bookrunner on two tranches of Duke Energy’s $400 million issuance of first-mortgage bonds and Piedmont’s $400 million issuance of senior unsecured notes for general corporate purposes.

Important Legal Disclosures and Information

*Data as of June 30, 2020

1. Includes U.S. IPOs, follow-ons and block trades greater than $50mm since 2000. Excludes BDCs, SPACs, ADRs, MLPs, IDSes, CEFs and Chinese issuers.

2. Follow-ons include block trades and marketed offerings.

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