Partner Piece: Tariffs and M&A: How to Mitigate Against Uncertainty

May 15, 2025

Tariffs and M&A: How to Mitigate Against Uncertainty

As the Trump Administration unveils its policy on tariffs, parties in M&A transactions are facing significant uncertainty affecting valuation, deal terms and post-closing risks. However, with creative strategies, dealmakers and their advisers can mitigate against these uncertainties and continue pursuing a growth agenda.

Purchase Price Adjustments

Buyers may seek to use purchase price adjustment mechanisms to reflect the financial impact of tariffs. This can be done through completion accounts provisions, which adjust the price based on the target’s net working capital or assets at closing, capturing tariff effects on inventory or receivables. Additionally, buyers may factor in tariff impacts on normalised EBITDA multiples, potentially negotiating bespoke line items in the purchase price formula to account for tariff-related earnings reductions.

Tariff-Specific Warranties

Including detailed tariff-related warranties in the sale purchase agreement may be another effective strategy. Warranties can cover the target’s supply chain, including country of origin, any modifications or terminations of supplier/customer relationships due to tariffs, inventory valuation impacts, and current tariff rates affecting the business. Tax representations can also be expanded to address tariff-related tax liabilities. Such provisions help allocate risk and require sellers to disclose tariff exposures comprehensively during the due diligence process.

Indemnities and Holdbacks

To protect against post-closing tariff liabilities, buyers may negotiate tariff-specific indemnities or incorporate tariff provisions into existing tax indemnities. Holdbacks or escrow arrangements can also be used to secure funds that may be needed to cover tariff-related losses discovered after closing. This approach balances risk sharing and incentivises seller disclosure.

Conditionality

Using tariff-related closing conditions that allow termination if tariffs materially affect the target’s operations or financials before closing can be another useful strategy. Additionally, parties can agree to extend the completion date in the event of tariffs being announced but not yet implemented.

Further, during the interim period between signing and closing, restrictions can be imposed on sellers taking actions in response to tariffs without buyer consent preventing sellers from making decisions that could worsen tariff exposure or affect deal value.

With an ever-changing global economic playing field, considerations like these are likely to become increasingly relevant and present in M&A transactions. Effective planning and engaging the right advisers is more crucial than ever in deal activity.

Get in touch

Edwin Coe is a leading independent London firm with international reach. We advise entrepreneurs, SMEs, funds on all aspects of corporate law.

Daniel Bellau specialises in public and private M&A, private equity and VC investments and fundraisings as well as equity capacity markets transactions on the LSE Main and AIM markets.

You can contact Daniel at daniel.bellau@edwincoe.com and visit us at www.edwincoe.com.

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