Jeff Kramer Interview with Dow Jones Energy
Updated: 4 days ago
2026-10-06 03:44:00 EDT
***Higher Interest Rates Could Favor Large Players, Smaller Deals***
LAS VEGAS -- The Federal Reserve raised the benchmark federal funds rate by 25 basis points to 3.75%-4.00% on Sept. 26, the first such rate increase since 2023. Policymakers indicate another increase could come before the end of this year if inflation persists.
Higher rates can slow the market for mergers and acquisitions and lower Ebitda multiples used to price transactions.
Dow Jones Energy spoke Tuesday with Jeff Kramer, managing director of NRC Realty & Capital Advisors, at the NACS Show in Las Vegas about how higher borrowing costs could affect downstream mergers and acquisitions:
Dow Jones Energy: Higher interest rates have slowed M&A in the past. What impact could higher interest rates have on M&A in the current environment?
Jeff Kramer: The 10-year Treasury bond is far more important than what the Federal Reserve does, other than quantitative tightening or easing. Capital decisions are not made on short-term rates. For long-term capital M&A planning, lenders and businesses look at 10-year treasury rates.
DJE: But 10-year Treasury rates have climbed sharply, so wouldn't that affect long-term borrowing?
JK: This time is different. What's different about this tightening policy is we're coming from unusually low rates. Most corporations have had low debt for a while. We have huge private capital requirements now for AI. Businesses have to take into account borrowing costs again. If this policy persists or gets worse, and borrowing costs get higher yet, it's a problem. It will affect the
Ebitda multiples to some extent. Multiples have been high -- 12 times Ebitda for some strong companies. There have been some larger transactions, but a lot of the deals have been smaller. Nice, tuck-in acquisitions make good economic sense to buyers. Some buyers also may shop in markets like the Midwest, where real estate values are lower.
DJE: Will higher rates favor larger buyers?
JK: There's no question higher rates favor large buyers. Their borrowing costs are lower, and they have the capital to invest in food service and technology to upgrade stores to make them competitive.
Reporting by Donna Harris, donna.harris@dowjones.com
Editing by Dean Visser, dean.visser@dowjones.com
Call if you have any comments or questions.
Jeff Kramer
(303) 619-0611
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