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Over the last fifteen years, zero interest rate policy (ZIRP) altered capital markets by impacting discount rates, which created a competitive advantage for private equity firms relative to other buyers of assets. This competitive advantage derived from the fundamentals of asset pricing — discounted cash flows (DCF) — which discounts free cash flows by a weighted average cost of capital (discount rate).

In 2022, Edward Chancellor published a book called The Price of Time, which chronicles the historical relationship of economic activity with interest rates. The conclusion of the book is that low interest rates reduce labor and capital productivity by reducing the threshold for efficiency in the deployment of capital. Chancellor observes that long periods of economic malaise tend to follow periods of capital excess.

Hudson Hill Capital, a private investment firm founded by Eric Rosen, today announced a significant majority investment in MarketTime, a SaaS platform that offers a comprehensive set of features to facilitate wholesale retail commerce between brands, manufacturer representatives, agents and retailers.

Over the past fifteen years, the private equity industry relied on M&A as a key pillar in value creation, thereby increasing its reliance on capital markets to finance returns. Over the next decade, higher interest rates will constrain access to capital for private equity owned businesses, lowering the attractiveness of debt funded M&A to generate equity returns.

Much has been made over the past 15 months about the impact of rising rates. Rising interest rates portend an ominous environment for the holders of existing assets, particularly those asset holders that acquired (and therefore priced) investments during a period when interest rates were very low.

In this article we’ll explore the “Sticky Situation” we find ourselves in financially and economically. Decades of easy money met the COVID crisis, knocking the US and global economy off its goldilocks relationship with low interest rates, low inflation, and low growth.

Global cloud-only digital transformation company Blue.cloud, announced that it has received a majority equity investment at an enterprise value exceeding $100 million from Hudson Hill Capital.