How will the Russia-Ukraine conflict affect a deal in Toronto?

February 24, 2022

by a searcher from University of Toronto - Joseph L. Rotman School of Management in Toronto, ON, Canada

I am currently in an LOI with a fire protection design, build, installation and services company, and diligence is progressing well. I wanted to understand the potential impact of the Russia-Ukraine tension on deal economics. What factors should I consider? What will be the impact on interest rates, supply chain (steel prices), construction (new build or retrofits), etc.? Would love to hear your thoughts or be pointed to resources you maybe reviewing that covers this topic. Thanks!

Reply by a lender
from University of Sydney in Toronto, ON, Canada

Hey Shobhit - great question. I have a client that uses a lot of Aluminum in their end products, and this conflict hits them hard in 2 ways - 1) Russia is a major producer of Aluminim and sanctions will hit availability; and 2) Russia is a major supplier of energy to western Europe. Sanctions will drive-up energy costs, and therefore raw material cost. So, to answer your question, I think any material inputs produce either by Russia or Europe that is energy intensive will start to cost more.

Reply by a searcher
from University of Massachusetts Amherst in New York, NY, USA

I've been thinking about the same thing and more about overall macro economy downturn/recession.I would think Fire Protection demand shouldn't be affected much, but if searching in a discretionary industry there is definitely more risk now than a year ago.

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