The current landscape of mergers and acquisitions (M&A) for middle-market companies is being dramatically reshaped by the new Administration’s tariff policies. As mid-market companies strategize their growth and exit plans, understanding the interplay between international trade policy and deal dynamics has never been more critical. Having guided dozens of mid-market companies through transactions in a volatile environment, the ClearRidge team has observed both significant challenges and unexpected opportunities emerging from today’s protectionist trade policies.
The Current Tariff Environment: A Seismic Shift for Deal-Making
Since returning to office in January 2025, President Trump has implemented unprecedented tariffs impacting trading relationships for US companies with countries all around the world, but most notably with China, Mexico, and Canada. These tariffs are more impactful than those imposed during his first term.
The stated objectives behind these measures include boosting domestic manufacturing, reducing trade deficits, creating US jobs and increasing US government revenue. While these goals align with certain national economic priorities, they create a complex and dynamic environment for companies pursuing growth through acquisitions or preparing for an exit.
Unlike large corporations with extensive resources and lobbying capabilities, middle-market companies exist in a more vulnerable position, they have less negotiating power to advocate for tariff mitigation policies. Yet paradoxically, their agility compared to larger corporations allows them to pivot more quickly in a changing landscape, as well as, their ability to plan longer-term without the need to satisfy impatient shareholders in quarterly reporting
Supply Chain Disruption and Valuation Volatility
For some middle-market companies, tariffs introduce multiple layers of complexity to M&A. Those dependent on international supply chains face potential increased costs and logistics challenges that directly impact profitability. Due diligence processes have necessarily evolved to thoroughly examine a target company’s supply chain vulnerabilities, vendor concentration, and geographic exposure.
The uncertainty surrounding tariff policies has created significant valuation volatility for those companies. Buyers face substantial challenges in appropriately pricing risk, which may lead to valuation disputes, extended negotiations, and sometimes stalled transactions. Financial models that previously served as reliable valuation frameworks now require scenario-based approaches that account for various tariff outcomes and their cascading effects on business performance.
On the flip side, there are other sectors that are benefiting from tariff disruption.
Strategic Opportunities in a High-Tariff Marketplace
The disruption created by tariff policies is catalyzing several positive trends in the M&A marketplace.
Domestic Acquisition Premium
Companies looking to reduce exposure to international tariff regimes are increasingly focusing on domestic acquisition targets. This shift has created premium valuations for U.S.-based companies with minimal international supply chain exposure, particularly those serving markets previously dominated by imported products. Middle-market companies with predominantly domestic operations are experiencing heightened buyer interest and often commanding stronger multiples than their internationally-dependent counterparts.
Vertical Integration Strategies
The fragmentation of global supply chains has renewed interest in vertical integration strategies. Middle-market companies are increasingly pursuing acquisitions of key suppliers or distributors to insulate themselves against cost volatility and supply chain disruptions. This trend is particularly evident in manufacturing, industrial products, and consumer goods sectors where component and material sourcing represents a significant portion of cost structures. Tariff uncertainty is pushing firms to diversify into tariff-friendly regions, spurring cross-border M&A.
Industry Consolidation Acceleration
High-tariff environments tend to drive consolidation as companies seek scale and operational efficiencies to offset increased costs. For middle-market companies, this presents both defensive and offensive strategic imperatives — either consolidate or risk being out-consolidated.
Strategic Playbook for Middle-Market Companies
Based on our firm’s experience guiding numerous transactions through this challenging environment, here are a few strategies to consider for middle-market leaders navigating M&A in today’s high-tariff landscape.
For Sellers: Maximizing Value Despite Uncertainty
Middle-market companies preparing for exit should prioritize demonstrating supply chain resilience. Highlighting strategies that mitigate tariff exposure — such as diversified supplier bases, long-term contracts with favorable terms, or localized production capabilities — significantly enhance perceived value in today’s market.
Providing scenario-based financial forecasts has become essential. Presenting potential buyers with multiple financial models based on different tariff scenarios builds credibility and reduces perceived risk. This transparency often leads to more productive valuation discussions and faster deal progression.
Strategic timing has never been more important. Companies in tariff-affected industries may benefit substantially from entering the market during periods of temporary policy stability or when tariff relief measures are introduced. Working closely with advisors who monitor policy developments can help identify optimal market entry timing.
For Buyers: Strategic Imperatives in Deal Evaluation
The heightened risk environment requires deeper operational due diligence than ever before. Buyers must look beyond financial statements to evaluate operational flexibility, sourcing alternatives, and potential for operational restructuring to mitigate tariff impacts. This includes assessing the feasibility and costs of nearshoring or reshoring operations.
Purchase agreements need careful structuring to address tariff-related risks through appropriate pricing mechanisms, representations and warranties, and indemnification provisions. Particular attention should be paid to definitions of “Material Adverse Effect” or “Material Adverse Change” and what constitutes “ordinary course of business” in a rapidly shifting trade environment.
Obtaining real-time policy insights has become a competitive advantage in deal-making. Buyers who leverage expertise from advisors with deep understanding of trade policy developments can better assess risks and opportunities, potentially identifying value where others see only uncertainty.
Looking Forward: Navigating the Evolving Landscape
While predictions in this volatile environment carry inherent uncertainty, several trends appear likely to shape middle-market M&A activity through 2025 and beyond:
- Valuation methodologies will continue evolving to better account for tariff risks, with greater emphasis on scenario modeling and stress testing.
- Deal structures will increasingly incorporate contingent considerations tied to specific tariff outcomes, allowing for risk-sharing between buyers and sellers.
- Industry-specific impacts will become more pronounced, with some sectors developing immunity to tariff concerns while others face fundamental business model challenges.
- Geographic shifts in acquisition targets will likely continue, with renewed interest in domestic and nearshore operations.
- Private equity dry powder will continue flowing toward middle-market opportunities as these deals require less leverage and often represent more recession-resistant cash flows compared to larger transactions.
Conclusion: Opportunity Amid Disruption
The current high-tariff environment undeniably complicates some middle-market M&A sectors, introducing new layers of complexity to valuation, due diligence, and deal structuring. However, history consistently demonstrates that periods of market disruption create opportunities for strategic advantage.
For middle-market companies, today’s environment rewards proactive strategy, operational flexibility, and thoughtful deal structuring. By understanding and mitigating tariff-related risks while capitalizing on emerging opportunities, both buyers and sellers can uncover significant value even in this challenging global trade environment.
The winning approaches will blend disciplined risk management with opportunistic vision — qualities that have always distinguished successful middle-market leaders. As your trusted advisor in this complex landscape, the ClearRidge team remains committed to helping you navigate these waters with confidence and strategic clarity.
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