August 2025: Current approaches to inventory and valuation due to tariffs

I am dating my subject because the search feature doesn't allow one to easily see dates and things are very dynamic. As of August 2025, it is clear that Trump's tariffs will continue to be a feature of his administration, though hopefully less than originally feared. There still might be considerable volatility in the next years though. Businesses have had time to deploy some limited mitigation strategies (e.g., alternate sourcing or pre-buying inventory) I am hoping that sellers are more willing to sell and negotiate now that there is a little more certainty. As an example, I am looking at a business that sources mostly from Taiwan. The tariff was just announced at 20% The business has engaged in significant pre-buy this year (at 10% tariff rate). They use cash accounting of inventory for tax reasons. I don't want to penalize their making reasonable inventory decisions but I also don't want to be responsible for obsolete inventory My current thoughts on how to value (feedback appreciated) 1. Normalize EBITDA to (a) remove excess inventory from P&L, i.e., adjust to accrual basis (b) scale up COGS to current tariff levels 2. Value business based on : (a) multiple of Normalized EBITDA, plus (b) Excess inventory at cost (consignment and/or with warranty for obsolescence) 3. Potential negotiation points: (a) "This is just negotiation. Tariffs will come down " --> forgivable seller note to cover upside (b) "You won't pay the full tariff next year because you will draw from inventory" --> pay seller for inventory at cost + current tariff. (need consignment model or other means to disincentivize excess inventory buys) I greatly appreciate any additional thoughts, or what you have seen as reasonable in discussions with sellers. Best regards, Joh