6 www.lexpert.ca
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to value them. For companies with mean-
ingful exposure to US trade, the prospect of
tariffs means you're likely looking at some
discounted valuations."
Emanoilidis points out that a seller in this
situation might want to defer any transac-
tion and is waiting for clarity on tariffs. Or if
a transaction does proceed, players on both
sides "will want to show greater caution as they
assess the implications of tariffs." is caution
results in more due diligence, Emanoilidis says,
and clients will look to lawyers to build safe-
guards into a deal to anticipate tariff risks.
As an example of how tariffs could impact
a transaction, Marshall Eidinger, partner at
Bennett Jones LLP, says: "Suppose a buyer
purchases a business for $5 million, and the
deal closes in six months. By then, the tariffs
come in, and the margins on the product
are now 40 percent
less. e company is
clearly not as valuable
as [the buyer] thought
it would be."
Eidinger adds, "So
the question becomes
whether there is a
mechanism in the
agreement between
buyer and seller to 'true
up' the purchase price."
It's "not just a sell-side thing ," says
Eidinger, adding that if the valuation isn't
to a seller's liking , there's always the option
to hold off on any deal. On the buy side,
"nobody wants to pay the same price for
a business that isn't as valuable as it once
was." e questions, then, turn to what
safeguards are built into the contract for
both sides and how to compensate if one
side wants to get out of the deal.
Sarah Gingrich at Fasken Martineau
DuMoulin LLP points out that while a lower
Canadian dollar could spur more inbound
dealmaking with Canadian assets as targets,
American firms might also want to make
deals here to hedge against any retaliatory
tariffs that Canada might impose.
At the same time, Canadian companies
could make acquisitions in the US to avoid
the US tariffs on goods they manufacture.
"Obviously, that may not be great for the
Canadian economy," she says. "But could
it be a potential driver for dealmaking in a
world with tariffs? Maybe," says Gingrich.
However, she says, there are still far
more questions than answers, and the
situation seems to change daily. Gingrich
notes that "the uncertainty concerns not
only the impact of tariffs on a particular
company or sector but also the double
whammy of their effects on the markets
and the dollar."
TRUMP-INSPIRED TREPIDATION
300
250
200
150
100
50
0
Source: London Stock Exchange Group
2000
Number
of
deals
January M&A activity in Canada
2005 2010 2015 2020 2025
All Canadian M&A deals Deals involving US acquirer
"FOR BUSINESSES HEAVILY RELIANT
ON TRADE AND EXPORTS, TARIFFS
MAKE IT MORE CHALLENGING
TO VALUE THEM"
John Emanoilidis
TORY'S LLP
