M&A Dealmakers Share Views From ‘Rollercoaster’ Impact of Tariff Policies

Reporting: Armie Margaret Lee

M&A dealmakers are navigating market turmoil on the heels of the recent tariff announcements.

“There’s no feeling that we can get off the rollercoaster yet,” said Joe Donohue, vice chairman of DC Advisory U.S. “I’ve never seen volatility like this before, and I’ve lived through many cycles,” he added.

“Everybody’s frozen at the moment,” said Ilan Nissan, head of private equity and M&A at Goodwin Procter LLP. “A fundamental predicate for M&A is visibility on the playing field, at least in the near to medium term, and that doesn’t exist at the moment. That said, given the shifting sands since the initial tariff announcement, this could evolve very rapidly.”

Areas where transactions might transpire include service-based businesses, Nissan said. He added that at some point, there could be a decent number of take-private deals “given the shellacking in the public markets.”

Some buyers and sellers are awaiting clarity on how the tariffs would affect operating models, overall financial performance and, ultimately, valuation depending on the type of company as well as transaction structure, said Eric Rutkoske, global head of M&A at Guggenheim Securities.

If some trade deals emerge during the 90-day tariff pause, particularly those that result in a net tariff reduction, “my sense is that will start to get things going again,” Rutkoske said, referring to M&A activity.

Some participants say the M&A picture that is forming so far this year has defied expectations they had at the start of the year.

“Many companies we expected to be sold this year will not be sold. Conversely, a smaller number of companies we did not expect to be sold will be sold,” said Justin Abelow, a managing director in Houlihan Lokey Inc.’s financial sponsors group and a senior member of the firm’s private equity practice.

More Extensive Diligence

M&A dealmakers “are still digesting the [tariff] news,” said Wayne Kawarabayashi, chief operating officer and head of M&A at technology investment bank Union Square Advisors. “I don’t think anybody has made some knee-jerk reactions.”

The 90-day moratorium on tariffs “allows people to take a breather, to really figure out how it’s going to impact their business,” he said.

With plenty of capital and a desire for dealmaking, corporates and private equity firms will find ways to engage in transactions, “but I think they’re going to be more thoughtful about it,” Kawarabayashi said, adding that dealmakers may do more extensive diligence.

Strategics to Be More Active

Solomon Partners CEO Marc Cooper noted that there’s been more M&A deals by strategic buyers compared with financial sponsors this year. It was easier for strategics to price risk due to their longer time horizon, he said.

With the tariff announcements, there’s uncertainty for strategics as well because they don’t know what supply chains and the competitive landscape will look like and what the cost of raw materials will be. Despite the uncertainty, strategics will continue to do deals, Cooper said.

Recent acquisitions by strategics include Prada SpA’s purchase, announced April 10, of fashion brand Versace from Capri Holdings Ltd. for $1.375 billion.

On the other hand, PE deal activity “will be muted,” he predicted. On the PE side, Cooper said there will be more “structured investments than straight-out purchases” likely because “there won’t be price discovery that will be acceptable to both sides.”

DC Advisory’s Donohue predicted that smaller acquisitions by strategics, such as those valued at $100 million to $200 million, will continue. As for large, transformational deals, strategics might wait until the dust settles before pursuing those opportunities, he said.

He noted that PE firms are in a more challenging position, with interest rates not coming down yet to a level they are hoping for.

Taking the Plunge

The uncertainty, however, is not deterring some from braving the M&A scene.

One M&A banker, who requested anonymity, told Octus, formerly Reorg, that their firm launched a sale process for a client last week but not before much consideration.

“You feel like you’re at the edge of the diving board, and you’re looking down at the deep end of the pool and you’re saying, ‘Do I do a nice swan dive here, or do I walk back to the end of the diving board and gingerly step off and walk away for a little while?’” the banker said.