Effectively navigating tariffs in cross-border M&A – Key considerations

the level of risk that a target company should be allowed to take on with respect to response to tariffs during the interim period. Buyers will want to protect their interest by introducing restrictions on how a target company can respond to tariffs, while sellers will want to retain discretion to respond to tariffs in a manner that is in the best interest of the business.

Termination rights

Termination rights in the definitive agreement may need to be revisited in light of tariffs. Parties may want to consider incorporating a specific termination right in the event that tariffs have a certain level of impact on the target business or circumstances change materially as a result of tariffs. Additionally, parties may want to consider whether a termination right should be triggered in the event a certain level of tariff provisions are implemented prior to closing, as this may impact the value proposition of the deal.

In conclusion, it is clear that navigating tariffs in cross-border M&A transactions will require parties to carefully consider how to allocate the risks associated with tariffs in an evolving and uncertain landscape. By incorporating tariff-related provisions in key transaction documents and deal terms, parties can mitigate potential risks and enhance the likelihood of a successful transaction in the face of unprecedented challenges posed by tariffs.