The Jerome Powell factor

After the benchmark 10-year Treasury yield hit a 16-year high in October, rates have come down as the Federal Reserve said it’s planning for multiple cuts to come in 2024 and beyond. The Fed’s overnight borrowing rate is at between 5.25% and 5.5% — significantly elevated from where rates had been since the financial crisis of 2008.

Rate cuts next year could push transformational deal-making to 2025. If media or technology companies want to acquire large assets and don’t have the cash on hand, they’ll want to wait for cheaper money.

“I had lunch in late November with the CEO of a major studio, and what he expressed is uncertainty around operating in this monetary policy environment,” said Martin. “What is the cost of capital? Am I better served punting until 2025 where I have more clarity when interest rates come down or remain static?” 

Still, major deals could be announced in 2024 with an assumption that the process of closing them will take 12 to 18 months. By that time, companies may bet on interest rates falling to levels more in line with the past 10 years.

Shari Redstone, chair of Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on Tuesday, July 11, 2023.

Shari Redstone has held talks for the last few months to potentially sell National Amusements, the controlling holding company of Paramount Global, according to people familiar with the matter who declined to be identified because the discussions are private. If that deal occurs in 2024, it could kick off a wave of strategic transactions, including selling dying cable networks to private equity firms, throughout the media and entertainment industry regardless of the macroeconomic environment.

National Amusements declined to comment.

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