Strategic Market Insights

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

3Q 2019 Trends & Outlook

M&A Market Executive Summary

  • The M&A market had another strong year in 2018 – Harris Williams closed 87 M&A deals, resulting in back-to-back record years for our firm.
  • Seven months into the year, the 2019 outlook for M&A activity remains positive due to slowing opportunities for pure organic growth, relatively strong corporate balance sheets, and an insatiable amount of private equity demand to invest in quality private businesses.
  • While the late-stage nature of the economic cycle is top-of-mind for investors, expect marquee assets with resilient business models to continue to command premium prices in competitive processes.
  • A surplus of capital in the forms of corporate cash reserves and private equity dry powder combined with reasonably aggressive debt providers will continue to support M&A activity levels and valuations. Indeed, S&P 500 aggregate cash positions (excluding financial companies) have hovered near $1.5 trillion over the past few years (Figure 1).

Figure 1: S&P 500 Aggregate Corporate Cash Balances Continue to Grow

Sources: FactSet and Preqin   /   Accessible Version of this chart.


  • Global private equity firms have over $1 trillion to invest over the next several years, and healthy annual fundraising levels and limited partner interest continue to increase this amount.[1]
  • Average purchase price multiples continue to be robust, with high-quality assets receiving significant buyer attention (Figure 2).


Figure 2: Average Purchase Price Multiples Remain Strong

Source: Standard & Poor’s   /   View Accessible Version of this chart.


Explore Recent Transactions »

IPO & Follow-on Executive Summary

  • After a difficult market emerged in May on ignited trade concerns (breakdown in China negotiations) equities bounced back in June and closed the best first half since 1997.
    • The Dow, S&P and Nasdaq all posted moderate gains of 2.6%, 3.8%, 3.7% respectively following 1Q’s sharp rally. Outperforming sectors included tech, consumer discretionary & communication services, while REITs and utilities underperformed over the quarter.
  • Although U.S. 2Q equity and equity related volumes fell modestly year over year to $73.2 billion, IPO volumes surged 80% to ~$25 billion (46 IPOs) with many deals drawing an overflow of demand. A large part of the uptick in IPO proceeds issued was in part due to an increase in large deals going to market.
    • Of the 46 IPOs during 2Q, 23 priced within the range, 16 priced above the range and just 7 priced below the range.
    • The average pricing vs. its filing midpoint +4.6%, and on average 2Q IPOs traded up 32% on the first day of trading.
    • Healthcare and technology deals continued to make up a large portion of IPO issuance.
      • Healthcare led the market making up ~43% of deals by units but just ~11% by proceeds, while tech made up 33% of deals by units and ~65% by proceeds (underscored by deals like Pinterest and Uber).
  • In 2Q 2019 there were 73 marketed follow-on’s resulting in $24.3 billion in proceeds, which was slightly lower than the 81 marketed follow-ons in 2Q of 2018 that raised $26.6 billion.
    • On average, offerings priced down 8.8% from filing and had an all-in discount (inclusive of underwriting fees) of 13.2%.
    • Aftermarket performance was positive, with companies trading up ~4.0% on average in the week following an offering.
  • In 2Q 2019 there were 27 block trades for $9.3 billion in proceeds, which was materially lower than the 43 block trades completed in 2Q of 2018 that raised $12.9 billion in proceeds.
    • On average, deals were bid at a discount of 3.8% and traded up 1.6% in the week following an offering.
  • For the quarter, Solebury advised on 6 IPOs, 3 marketed follow-on’s and 4 block trades for over $9.3 billion in total proceeds.
    • On the IPO front, Solebury advised on Avantor, which was the second largest IPO of the year as well as 3 of the 4 Consumer IPOs year to date (Grocery Outlet, Beyond Meat & REVOLVE).
      • Additionally during 2Q 2019, Solebury advised on Mayville Engineering Co. & Palomar Holdings.
    • Solebury also continued its role in the monetization cycle for some of its most prominent clients as well as new engagements:
      • Engagements included a marketed follow-on post YETI’s October 2018 IPO as well as a marketed follow-on and TEU offering for Aqua America.
      • Solebury advised on 4 block trades in 2Q 2019: two trades for BJ’s Wholesale Club including a clean-up of CVC’s position in the stock, along with Ceridian’s first block trade (Solebury’s fourth advised transaction for the issuer), and the third 144 block trade of lululemon for selling shareholder Advent.

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Debt Capital Markets Executive Summary

Middle Market

  • Seasoned middle market borrowers are able to raise loan capital in size at a relatively low cost as banks look for ways to grow loan volume. Syndicated middle market volume and number of transactions in the first half of 2019 were both down year over year, with borrowers electing to hit pause in the first quarter, but becoming more active in M&A and refinancing in the second quarter.  We expect the second half of the year to be a good environment for middle market borrowers to refinance or raise new loan capital at attractive pricing and terms.
  • Asset-based loans continue to be an attractive source of capital, banks are eager to lend, and borrowers continue to favor banks able to provide large commitments in support of their transactions.

Decreased 1H19 Middle Market Issuance Creates Opportunities For Seasoned Borrowers to Raise Capital

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Leveraged / High Yield

  • The syndicated leveraged loan market is balanced: volume is down and new CLO creation is driving demand, which is partially offset by 33 consecutive weekly outflows totaling $31.8 billion from loan mutual funds and ETFs. The environment is creating a backdrop where spreads and OID are wider versus 2018, volume is down, and investors are pushing back on weak, over-leveraged deals. The end of 2Q 2019 saw deals flex to favor investors – a trend we expect to continue – as investors are cognizant of where we are in the economic cycle in view of a larger mix of single B rated deals that allocated in May and June (an astounding 44% of June’s deals were rated either B3 or B- by Moody’s or S&P, highlighting the need for the better-quality, lower-leveraged or double B rated deals in the second half of 2019).
  • Spreads and OIDs for Ba3, Ba2, and Ba1-rated borrowers are wider, with spreads now generally in the L+200 to L+275 range (up from the L+175-225 context) and OIDs deepening to ~99-99.75 from ~99.75-100 last year.
  • The U.S. high yield bond market had a strong second quarter, anchored by June’s $28 billion of issuance, the busiest month since September 2017. In the first half of 2019, volume hit ~$130 billion, up 18.5% year over year. Investors are pouring into fixed rate high yield bonds, with June seeing positive flows into bond funds three of the four weeks, including a $3.1 billion inflow (the largest since February). Double B rated issuers are dominating issuance, with new issues oversubscribed 3x on average, and pricing hitting at the tight end of talk. Most proceeds have gone to refinance existing debt. Despite market uncertainty, current positive trade news and higher oil prices should bolster the market as we progress into the second half of 2019.

Double B Spreads Wider Relative to 2018

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Investment Grade

  • Investment grade loan volume in the first half of 2019 trailed the first half of 2018 by 8%, but is the second-highest print going back to 2000, indicating that banks are open for business and clients are actively raising loan capital to back M&A, general corporate purposes, and refinancings. Pricing is consistent with prior quarters, and banks are eager to boost lending volume by refinancing existing transactions and bringing new deals to market.
  • Investment grade bond volume in the first half of 2019 tallied $603 billion, down 12.6% year over year. Volatility plagued the second quarter with China trade tensions and Fed policy coming into focus. U.S. Treasury yields plummeted (10 year closed the quarter at 2.01%, starting at 2.50%), while investment grade indexes saw spreads tightening over this same time period, resulting in low all-in yields for issuers and credit spreads becoming a higher percentage of all-in yields. Despite that seemingly positive backdrop, issuers did not leap into the market as new-issue concessions trended higher and primary oversubscription waned. The broader macroeconomic picture is a focal point for the second half of 2019, with a Fed cut looming, trade tensions still present, and economic indicators presenting mixed signals.


Explore Recent Transactions »

Recent Transactions

Harris Williams

M&A Advisory

  • Harris Williams recently advised Vital Farms, Inc. on its investment from Manna Tree Partners. Vital Farms is a leading provider of ethically produced pasture-raised protein and dairy products.
  • Harris Williams recently announced that it advised Ovation Fertility, a portfolio company of WindRose Health Investors, LLC, on its recapitalization by investment funds managed by Morgan Stanley Capital Partners. Ovation Fertility is one of the fastest-growing and highest-quality fertility platforms in the U.S., owning and operating 11 market-leading fertility and genetics laboratories that serve physicians across 11 states.
  • Harris Williams advised Imperial Dade on its sale to Bain Capital Private Equity, LP. Imperial Dade, a portfolio company of Audax Private Equity, is one of the largest pure-play distributors of foodservice disposables and janitorial sanitation products in the U.S.
  • Harris Williams advised FRONTSTEPS, a portfolio company of CIP Capital, on its strategic investment in Caliber Software. FRONTSTEPS is an industry-leading SaaS platform serving single-family and condo high-rise associations with unified property management, resident portals, accounting, payments and security solutions.

Solebury Capital

IPO/Block Trade Advisory

  • Solebury Capital advised on an IPO of $435 million for Grocery Outlet, a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores. The 100% primary deal priced $5 above the initial range and $3 above the upwardly revised valuation range. The IPO went on to trade up 30% on the first day of trading – well below the typical ‘pop’ for IPOs pricing above the range.
  • Solebury Capital advised on an IPO of $277 million for Beyond Meat, which is one of the fastest growing food companies in the United States, offering a portfolio of revolutionary plant-based meats that enables consumers to experience the taste, texture and other sensory attributes of popular animal-based meat products while enjoying the nutritional benefits of eating BYND’s plant-based meat products. The upsized, 100% primary deal priced at the top end of the upwardly revised valuation range and went on to trade up 316% 30 days post IPO.
  • Solebury Capital advised on an IPO of $244 million for REVOLVE, a go-to online source for discovery and inspiration, delivering an engaging customer experience from a vast yet curated offering totaling over 45,000 apparel, footwear, accessories and beauty styles. The deal, which priced at the top end of the marketing range in June 2019, raised 25% primary proceeds while serving to monetize secondary shares for its majority shareholder TSG Consumer Partners as well as REVOLVE’s co-founders/co-CEOs.
  • Solebury Capital advised on the $1,984 million concurrent public offering of Common Stock and Tangible Equity Units for Aqua America. The equity offering priced at a -5.9% file-to-offer discount, a -4.7% discount to the 30 day VWAP and a -0.6% discount to last close. The TEU offering priced with a 6.00% dividend, a 22.50% conversion premium and a 3 year term.

PNC Debt Capital Markets


  • EQT – Acted as Administrative Agent on EQT’s new $2.5 billion Revolving Credit Facility and was awarded the mandate to refinance the Company’s Senior Notes with a $1.0 billion Delayed Draw Term Loan.
  • Neogenomics Laboratories – Acted as Lead Left and Administrative Agent on the Company’s $250 million of Senior Secured Credit Facilities consisting of a $100 million Revolver, $100 million Term Loan and $50 million Delayed Draw Term Loan.
  • CNX Resources and CNX Midstream – Served as Lead Left and Administrative Agent on CNX Resources’ $2.1 billion Revolving Credit Facility and CNX Midstream’s $600 million Revolving Credit Facility, both for general corporate purposes.
  • Duke Energy – Served as Active Bookrunner on Duke Energy’s $1.2 billion issuance of Senior Notes.

Important Legal Disclosures and Information

  1. FactSet and Preqin

Sources: PNC Capital Markets LLC, S&P Capital IQ LCD, Refinitiv LPC, Bloomberg

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