The Fed’s preferred inflation measure hit its highest reading in three years at the end of June, and with it, whatever remained of the rate-cut narrative evaporated. The market isn’t just pushing out expectations anymore; it’s starting to price in a hike. For FBA deal professionals, the read-through is straightforward: LBO capacity tightens, middle-market structures get harder to finance, and strategic acquirers with clean balance sheets widen their edge over sponsors.

What this environment does, more than anything, is sharpen the penalty for buying the wrong asset. Businesses with recurring revenue, non-discretionary demand, or real pricing power are holding multiples. Commodity-exposed names and legacy ultra-processed platforms are not, and the gap is widening. Sponsors can always paper over modest growth with capital structure in a low-rate world. That math stops working when rates stay elevated.

Kraft Heinz made this concrete in early July. The company reorganized into three global regions, collapsed procurement and supply chain under one executive, and began cutting senior headcount. Management called it a push for “volume-led growth.” The more honest read is a portfolio of legacy brands getting squeezed from two directions at once: the MAHA consumer shift pulling volume away from ultra-processed products, and a cost of capital that no longer forgives slow-growth assets.

Danone is playing a different hand. The company closed Huel in March and MADE Group in June, two back-to-back moves into high-growth, better-for-you platforms. That is not opportunism. Danone has picked a side in a bifurcated market and is writing checks to prove it. In this rate environment, that kind of conviction is the only thing that justifies the premium.