How will Mergers & Acquisitions change in a tariff war environment?
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It appears that the world is moving towards protectionism where it will become every nation fending for themselves.
International organizations power and authority is being diminished or eroded.
If cross border trade are affected because of tariffs and in the near term, imports will cost more how will this affect cross border m&a?In my opinion protectionism could make M&A more appealing for companies looking for sales growth in markets they can no longer reach (or that they could reach with higher costs). Yet, the environment should be stable, and with clear rules. Otherwise, any activity in this direction will be discouraged.
Mery, my industry is federal IT contracting, and I find your perspective refreshing. In our space, the ambiguity of DOGE cuts to staff and contracts, along with the sustainment of interest rates and therefore the increased cost of acquisition, have created in my estimation an outright fear of M&A. Right now, acquirers’ credit is tighter with higher interest rates, and target companies can’t provide a realistic bookings forecast that would help potential buyers. I hope this changes soon, but am not holding my breath.
It will be interesting to see how this will pan out. Here is some sombering read in the current state of M&A:
Private Equity World Engulfed by Perfect Storm
Tariff turmoil dashes investors’ hopes for payouts; dealmaking grinds to near standstillI think the forecast for cross-border M&A will depend on how nations react to the current tariff situations. If global nations grow more concerned about the situation and lean toward protectionism to safeguard domestic industries and technologies, countries may establish bans on international M&A, negatively impacting cross-border deals. On the other hand, if this doesn’t happen, the situation may align with Mery’s comment and have a positive impact on boosting cross-border M&A.
The global tariff environment is clearly hampering the current M&A market. Given that tariffs can change at any time, forecasting purchase price / methods and synergies is extremely difficult. And even if a deal closes in this environment, the future volatility in costs due to tariffs, supply change shortages, and even a possible recession will significantly impact the financial success of the deal.
When goods, raw materials or products are subject to higher import duties, the target company’s operating costs increase. PolyTrack
Further expanding the discussion to the additional turbulent geopolitical pressures – What are the cultural and workforce implications post merger? In Australia, We are already experiencing restrictions on postal services and employment visas and envisage there will be tighter controls on talent mobility for critical capability, cross nations under the current climate
In my opinion, M&A esp cross border ones, will become more selective and regionally focused as tariffs and protectionism erode traditional synergies. Valuations will compress, due diligence will intensify on political and regulatory risks, and deals will increasingly use joint ventures, minority stakes, and earn-outs to share risk and localize operations in uncertain trade environments.
I think cross border M&As could be boosted in U.S.A. as a result of the tarrifs because some firms may decide to buy a local firm in order to enter the market. After all, tarrifs is a well known, classical barrier to entry. However, adverse effects may also prevail because due to the barrier that the tariffs create, some firms may simply seek other geographical destinations and markets.
In a tariff war environment, M&A activity would likely become more cautious and regionally focused. Cross-border deals might slow as tariff uncertainty affects valuations and increases risk premiums. Acquirers could pursue “jump-the-tariff” strategies by buying local firms to avoid import costs. Due diligence would also expand to include trade exposure and supply-chain adaptability, making strategic flexibility a key success factor in future integrations.
From a Canadian perspective, I see both risk and opportunity in the current political climate and tariff uncertainty. Cross-border M&A is likely to become more selective and strategically cautious. As Abdul and Jonathan noted, due diligence will need to go beyond financials and include deeper assessments of political risk, trade exposure, and supply chain resilience. I also think this will require more in-depth planning and preparing for more complex workforce assessments. Especially when talent mobility, immigration, work permits etc., are also restricted as Josette pointed out.
I think it could incent countries to look at how to leverage and expand localized operations and opportunities. For companies looking to enter the Canadian market, acquiring a domestic firm may be more viable than exporting goods or services. We could see greater cross border international M&A activity, particularly in sectors we are strong in like agri-food, natural resources, insurance. But more attention will need to be paid to cultural alignment and workforce continuity.
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