Tariff impact on valuations & inventory strategy

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by a professional from Boston University
in Chicago, IL, USA

1yr ago

Tariff impact on valuations & inventory strategy

~ First of all, this is not to be considered political at all ~ I am curious to know what impact the tariffs have had on deals that are focused on retail business both online and brick & mortar for companies in the United States. Has there been a dramatic decrease in the deal offerings, any sort of hedge for protection, raise in prices, etc. Also, has anyone experienced or implemented strategic initiatives around inventory management to try and wait out the storm until the environment becomes more stable? I have worked with a few clients that have taken different approaches to dealing with the uncertainty and am curious if anyone else has seen similarities.

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reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Just my two cents as I recently did a video on this, but with all of the clients I work with on the lending side we have not really seen much of an impact yet. Due to delays in things going in place and many clients already having inventory in hand, it is not going to be until May and more likely June financials where we start to see the real impact. I think we will learn more over the next few months. With that in mind, I think it is hard for buyers to really understand the impact until it starts to show up in the numbers. I have seen some deals get delayed while buyers await the impact. Outside of that I have been seeing other buyers trying to push the risk to seller notes that maybe have forgiveness or earn-outs, but we have not seen buyers been as willing to do that. I do not think buyers feel pressure to sell due to the tariffs, so I think they are waiting and seeing what the ultimate impact will be. I hope this helps.

reply by an intermediary 1yr ago
in United Kingdom

There will be a global impact if tariffs do roll out. I expect we will see lower valuations in the UK - and more delays. Buyers of product businesses (manufacturing or distribution) will inevitably want to see the outcome once increased costs in their supply chain or lower margin in revenues (if exporting to US), start to flow through. But this may take many months, especially if the business is fairly low down in a supply chain. For sellers, I will be encouraging all to conduct an audit of their supply chain & track which have increased their prices and change supply routes if necessary. These will be company by company decisions, some purchasing prices may increase, some may actually fall if stock needs to be offloaded to markets other than US. So as a buyer in the coming months, ask for evidence that a similar exercise has been done by the companies you are looking at. This should either give you comfort or raise alarm bells.