‘I don’t believe in trying, I believe in doing’
Builds on the past, offers a glimpse into the future
June 16, 2025
As the Donald Trump administration’s tariffs, implemented this spring, are shaking up global trade, the fallout has inevitably extended into mergers and acquisitions.
As import duties yo-yo across multiple sectors, companies are recalibrating their growth plans.
Overall, we’re seeing a temporary hold on deal-making for companies affected by the tariffs.
Buyers are in a period of wait-and-see, while businesses figure out how tariffs will impact their operations and profitability.
Potential investors, wary of risk and uncertainty, may adopt a more cautious stance.
We can expect increased due diligence on the supply chain, as well as alternative deal structures.
Earn-outs, seller financing and other contingencies may increase as a way to bridge valuation gaps and shift some transaction risk back onto the seller.
Right or wrong, the “America First” trade policy is creating a complex new reality for businesses.
Shifting trade dynamics may help drive home a fundamental restructuring and redefine business strategy for years to come.
Supply chain shockwaves
Prior to COVID-19, during the sale of a business, buyers put a lot of effort into scrutinizing company financials, management capabilities and customer mix.
Supplier relationships, on the other hand, received little attention.
The prevailing assumption was straightforward: You bought from companies, they made a profit, and naturally, they would continue to sell to you.
The pandemic changed all that, turning the global supply chain on its head.
Business owners, jolted from a “just-in-time” lean operational model, pivoted toward a “just-in-case” mentality.
If they could get their hands on products or raw materials, they’d buy as much as possible and hope their competitors would run out first.
Fast forward four to five years – the supply chain had largely recovered, and we were back to a sense of normalcy.
Then, in April 2025, the tariffs struck.
Overnight, this created a wave of uncertainty, and the supply chain, once again, was turned upside down.
For business owners who hadn’t fully absorbed the lessons of COVID, this second major disruption came with some sobering insights.
Redundancy in the supply chain is no longer a nice-to-have but a critical component of business value and resilience.
Redundancy and diversification
When we talk to business owners about how to build value in their companies, we obviously talk about growing profits and EBITDA, which in turn drives higher multiples.
Most businesses are valued based on cash flow.
However, de-risking that cash flow – ensuring consistency and sustainability – is almost equally important.
It’s one thing to have a backup factory or supplier for every critical need.
But now, the highest value will come when a business has supplier relationships in multiple countries.
Geographic diversification allows a company to pivot if one country falls out of favor or tariffs skyrocket on another.
Diversification beyond the supply chain
When it comes to adding value in your business, diversification matters across the enterprise.
It’s a foundational element in de-risking a company and can enhance value even if EBITDA doesn’t change.
Three key areas are now in the spotlight: suppliers, customers and management.
As discussed, a diversified and resilient supply chain is crucial.
In addition, over-reliance on a single customer (typically one accounting for 20-25% or more of revenue) can negatively impact salability, value and deal structure.
Finally, build out your management team.
If the owner “is” the business, the company becomes inherently less transferable.
A capable management team is essential to maintain continuity after a sale.
Deal impact
In terms of market impact, many large, cross-border deals have essentially stopped.
However, the lower middle market shows more resilience.
As of late May, fewer than 10% of our active deals were paused due to tariffs.
The situation is evolving rapidly.
There’s hope that by early summer, many of these uncertainties will be worked out.
If the 90-day reprieve with China results in tariffs settling back to a 10-30% range, for example, a sense of stability could return.
Ultimately, it boils down to clarity and predictability.
Whether tariffs are 10% or 100%, if businesses know what to expect, they can adapt.
If supply chain strategies can be recalibrated, and we see additional rate cuts in the second half of the year, M&A activity could kick back into gear.
For now, however, we have one clear takeaway: Strategic diversification and a proactive approach to de-risking are not just best practices – they’re pivotal for business value and M&A success.
