By Blair Levin
Legal settlements like Paramount’s with Trump erode shareholder value, this former FCC official says
M&A deals face new hurdles in the form of a ‘Trump transaction tax’ and a ‘Trump transaction trap.’
Stephen Colbert, the CBS late-night talk show host, was unequivocal in his assessment of Paramount Global’s $16 million settlement with President Donald Trump. “I believe this kind of complicated financial settlement with a sitting government official has a technical name in legal circles,” he said. “It’s a big fat bribe.”
Jon Stewart of Comedy Central’s “The Daily Show” followed suit, calling the settlement “shameful.” Both hosts, who work for Paramount Global (PARA), the parent company of both CBS and Comedy Central, were nominated for Primetime Emmy Awards this week.
Colbert noted on Tuesday that the trade press was speculating that “the new owner’s desire to please Trump could put pressure on late-night host and frequent Trump critic Stephen Colbert.”
Two days later, CBS announced that “The Late Show with Stephen Colbert” would air its last show in May 2026. According to news reports on Thursday, Paramount and CBS said the cancellation “is purely a financial decision against a challenging backdrop in late night. It is not related in any way to the show’s performance, content or other matters happening at Paramount.”
How the Trump transaction tax is a trap
Excitement after the 2024 election for an M&A boom has given way to a new reality, unexpected by investors and chief executives. Deals face new hurdles in the form of a “Trump transaction tax” and a “Trump transaction trap.”
The tax is the cost of a corporate transaction approval outside of the normal parameters of competition or public-interest analysis.
The trap is the negative consequences that come from paying the tax.
The Paramount-Skydance Media merger Colbert referenced is a perfect example. Paramount paid Trump $16 million to settle a lawsuit about a “60 Minutes” segment – something observers believe was necessary for Paramount and Skydance to obtain FCC approval for the deal.
While $16 million may not be material in the context of the $8 billion deal, the trap is. By paying it, Paramount’s board is open to potential bribery charges, and/or the possibility of derivative shareholder suits.
Shareholders could claim that settling the lawsuit, widely perceived to be frivolous, was a waste of corporate assets. But a possible defense – that it was necessary to obtain deal approval – may be worse: providing something of value to a public official with the intent to influence their regulatory oversight is the very definition of a bribe.
Read: Paramount did what companies are supposed to do in complex legal terrain
The payment will make it harder and more expensive for Paramount to win projects.
There’s another, less understood, tax as well. Media properties compete for two things: customers and talent. It is bad enough that the merger review eroded the value of both “60 Minutes” and CBS News, as well as causing the departure of top talent – now including Colbert.
But the bigger difficulty will be with the Paramount streaming service, perhaps the most valuable service going forward. The payment will make it harder and more expensive for Paramount to win projects they might want if the producers, directors, writers and actors have concerns about the willingness of management to withstand controversy about a program.
Further, it demonstrates to investors that streaming companies with federally regulated components are at a disadvantage relative to unregulated streaming companies such as YouTube (GOOG) (GOOGL), Apple+ (AAPL) and Netflix (NFLX).
Pay to play
The Trump transaction tax has been imposed on other media deals too. The Federal Trade Commission just approved advertising giant Omnicom Group’s (OMC) acquisition of Interpublic Group (IPG)- but only after Omnicom agreed that it won’t direct advertising away from media outlets based on political or ideological viewpoints. This condition appears designed to specifically benefit Trump’s Truth Social and Elon Musk’s X.
Omnicom is trapped. It cannot advise its clients to direct ads to the most beneficial platforms, but rather to use platforms that may be contrary to the clients’ interests. Will this devalue the effectiveness of a $250 million global advertising budget that Omnicom has in its portfolio? Might an advertiser want to work with another agency that was not constrained in this manner? Yes, and yes.
The trap isn’t limited to the federal government. States also have a role in approving corporate transactions and might look at issues differently from Washington. Verizon Communications (VZ), for example, had to agree to disown its DEI program to gain FCC approval to purchase Frontier Communications (FYBR). Verizon now faces increased scrutiny from the California Public Utilities Commission about whether its concessions to the FCC violate California law that requires supplier diversity. The tension between state and federal regulators represents an unresolved risk to the transaction.
Tough road for Disney and Comcast
The Trump transaction tax distorts company valuations and market forces that should be driving the deals.
The next iteration of the tax/trap will play out when the FCC loosens its broadcast-ownership rules, setting off a frenzy of broadcast transactions. Companies viewed as “Trump-friendly,” such as Nexstar Media Group (NXST) and Sinclair (SBGI), seem positioned for a relatively smooth path for transactions – though past loyalty to Trump is no guarantee of an easy path.
A big problem awaits Walt Disney (DIS) and Comcast (CMCSA), whose pursuit of shareholder value may include buying or selling broadcast outlets. Trump regards these two media giants as enemies, arguing that their news coverage should cause them to lose their licenses.
Expect the FCC, as it did with Paramount, to raise questions and delay approval, making Disney and Comcast less attractive as buyers, even if strategically they are the best fit. Licenses they want to sell will be less attractive due to the kind of uncertainty and delays seen in the Paramount-Skydance transaction. Either way, the Trump transaction tax distorts company valuations and market forces that should be driving the deals.
This is the pain point for investors and management: fealty to free markets or fealty to Trump. The cost is likely higher than investors currently understand.
Blair Levin is the policy adviser to New Street Research, an equity research firm. Previously, Blair served as chief of staff to FCC Chairman Reed Hundt (1993-1997) and directed the writing of the United States National Broadband Plan (2009-2010).
More: Stephen Colbert, an outspoken Trump critic, says CBS is canceling his ‘Late Show’ in May 2026
Also read: Paramount’s settlement with Trump could finally lead to its $8 billion Skydance merger
-Blair Levin
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