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 standstillThanks for posting that link, Gokhan – interesting read.
I 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.
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