What every buyer needs to consider before closing the deal.
When you’re acquiring a small business, changes in trade policy — especially tariffs — can quietly erode deal value, upset supplier contracts, and create unexpected liabilities. In today’s climate, where tariff changes can hit fast and without warning, deal structuring and due diligence must adapt accordingly.
Here’s what to watch before you sign.
One of the most immediate effects of new or increased tariffs is the disruption of supplier and customer relationships. As a buyer, you must evaluate:
Has any supplier or customer relationship been terminated or modified as a direct result of tariffs?
Are there renegotiations or lost contracts already happening that will impact future revenue?
Without clarity here, your projected cash flow could be on shaky ground.
Tariff shifts may result in:
Decreased net realizable value of inventory
Delays or added costs in obtaining new inventory
Risks to forecasted salability, which could lead to increased reserves for obsolete or slow-moving stock
For inventory-heavy businesses, this should be a core part of your quality of earnings review.
In many deals, buyers seek reps and warranties that no “material adverse changes” have occurred. But:
Is the implementation of new tariffs considered a materially adverse change?
Could the change alter what constitutes the ordinary course of business?
These gray areas can spark post-closing disputes — or justify a retrade.
New tariffs might mean:
Previously unaccounted-for liabilities on the books
New payables associated with retroactive tariffs or contract penalties
Ensure your diligence drills into whether any such risks exist.
Finally, the financials you’re reviewing may not fully account for the impact of tariff policy changes. Consider whether:
The financial statements fairly present the company’s current condition given the latest developments
Revenue, gross margin, or operating profit have been materially distorted by these external changes
If not, that EBITDA multiple you’re using might be too generous.
If you're interested in exploring more about how Trump-era tariffs are impacting small business acquisitions and the broader M&A landscape, here are two valuable reads from trusted sources:
Trump’s Tariffs Pose New Dangers for Mergers and Acquisitions – Bloomberg Law
This article delves into how recent tariff policies are compelling businesses and advisors involved in M&A transactions to proactively assess tariff impacts on valuations and identify potential liabilities. It offers a comprehensive analysis of the challenges posed by the evolving trade landscape
A recent Reuters article highlights how SMB acquisitions are increasingly incorporating earn-outs and other contingent structures to manage valuation uncertainty driven by Trump-era tariffs. These tools help buyers and sellers close the gap between perceived value and actual performance under evolving trade policies.
This article highlights how heightened tariff concerns and global trade tensions have led to the sharpest decline in mergers and acquisitions activity in over two decades. A useful read for those tracking deal volume trends and the macroeconomic effects of protectionist trade policies.
NerdWallet outlines four key ways tariffs can affect small businesses—from higher input costs to supply chain disruptions—offering a practical look at the risks facing SMB operators and potential buyers.
As trade policy evolves, smart buyers need to think beyond the LOI. The effects of tariffs don’t just show up in cost of goods — they influence supply chain resilience, legal exposure, and future earnings potential.
Make sure your M&A due diligence and deal terms reflect this new reality.
Contact us today to learn how we can support your next deal.