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?