Tariff Time Diligence

April 07, 2025
by a searcher from George Mason University in North Carolina, USA
Dealmaking just got a whole lot harder.
We’re on tariff time now.
If you're under LOI or searching to buy a business, you need to ask the right questions for this new environment. Tariffs will kill some deals and present opportunities for others. Understanding real-time data is critical, but also reviewing historical data on how the target fared during prior slowdowns.
Every industry and target will be impacted differently, and even the least physical / most digital service business will be affected as customers are impacted by the changing economy.
Here’s a list to supplement your diligence.
Questions:
• How is the business impacted by tariffs?
• What’s the hit to gross margins? (by product and segment)
• What’s the plan to address cost increases? (absorb, pass through, cut elsewhere?)
• Relative to competitors, is the business uniquely exposed or uniquely protected? (maybe it’s a winner)
• What’s the exposure by supplier? (examine last 2 TTM periods of spend, by product and country of origin)
• What’s the exposure by customer? (examine last 2 TTM periods of sales, with industry/segment and location)
• Are alternative suppliers available and being pursued?
• What supply chain disruptions have occurred or are expected? What’s the contingency plan?
• What import/export regulations affect the business, if any?
• How did the business perform under prior administrations when tariffs were imposed? Or during the last recession?
Documents:
• Supplier contracts (look at price escalation, force majeure, termination).
• Customer contracts (same – may need to deploy them).
• Communications with suppliers (look for disputes, price hikes, terminations, slowdowns).
• Communications with customers (look for disputes, pullbacks, pricing issues, bad debts).
• Import/export licenses, permits and compliance procedures.
• Any past or current investigations or disputes related to customs or trade laws.
What would you add to this list?
from University of Illinois at Urbana in Champaign, IL, USA
from University of San Francisco in Boston, MA, USA