Navigating M&A Risks in an Era of Tariff Uncertainty

Optimism is returning to the M&A world. Market fundamentals and macroeconomic projections are providing reasons for cautious optimism among dealmakers.

Notwithstanding aggressive and unpredictable trade actions, chiefly tariffs, investors are exploring opportunities for growth and diversification even with the uncertainty.

That said, in April, M&A volume fell to levels not seen since the global financial crisis, even dipping below the lows of the COVID-19 recession. Business leaders cited tariffs and trade policy as the reason for delaying capital deployment, as the increasingly uncertain investment climate favored holding off on cross-border transactions.

Even so, not all sectors were affected equally. Deal activity in technology surged, with over half of $100B+ deals. Why? Because digital businesses are less exposed to tariffs, and AI-led innovation continues to offer compelling long-term returns. Still, traditional industries struggled, especially those exposed to global supply chains or dependent on imported inputs.

Across all industry sectors, one thing became clear: in an uncertain environment, successful dealmaking depends on risk-adjusted creativity. Legal and financial structures for transactions must evolve to mitigate political instability and market volatility.

Four Risk-Shifting Strategies for Dealmaking in Uncertain Times

To adapt, dealmakers are increasingly relying on four strategies to mitigate risk and keep deals on track:

Deeper, Longer Due Diligence: Buyers are expanding the scope and duration of due diligence to investigate and account for exposure to tariffs and geopolitical shocks. That means not just looking at financials but mapping the entire value chain, especially suppliers, logistics, and end-markets. Tools like supply chain mapping and geopolitical heatmaps help assess risk exposures. and model future scenarios, including worst-case outcomes. This kind of diligence isn’t fast, but in today’s climate, it's essential Earnouts and Contingent Consideration: Earnout provisions help bridge valuation gaps, and may be a strategic and economic necessity. With future uncertainty, earnouts allow parties to move forward without relying on a fixed valuation. During COVID, earnouts were used  for good reason. They align incentives, de-risk future performance, and offer sellers upside while protecting buyers from overpaying. In the current environment, the same advantages pertain to earnouts even though sellers usually want the certainty of an all-cash offer.

Material Adverse Effect (MAE) Clauses: MAE clauses give buyers a legal exit if an acquired business deteriorates before closing. While these clauses are standard, their importance grows during periods of high uncertainty, and their terms evolve with it. Following the 9/11 incident, “terrorism” became a common MAE exception. Post-pandemic, “pandemics” joined the list. Now, we’re seeing trade and tariff-related MAE exceptions gain ground. Buyers should press for disproportionality carve-outs that allow deal termination if new tariffs hurt the target disproportionately relative to peers.

Representation & Warranty Insurance (RWI): RWI helps buyers hedge against undisclosed liabilities, including those related to trade exposure. Because some insurers are wary of covering tariff-related risks, they haven’t been willing to issued “blanket” exclusions. Instead, underwriters are evaluating whether buyers have conducted reasonable diligence, modeled exposures, and responded appropriately to regulatory shifts. Buyers should prioritize policies with narrowly defined exclusions and be prepared to demonstrate robust diligence protocols.

Tariff-Free Islands: Where Deal Remains Strong

Despite the noise, not every part of the economy is under siege from tariff. Several sectors remain relatively insulated from the effects of tariffs and have shown resilience:

• Technology and SaaS: Minimal physical goods exposure, high scalability, and strong innovation pipelines.

• Professional Services: Domestic focus and low reliance on import/export dynamics.

• Energy: Oil and gas, notably, have been exempt from many tariffs and benefit from deregulation under "Drill-Baby-Drill" policies, though inflation in capital equipment costs remains a headwind.

These segments continue to attract capital, particularly as investors seek growth in places with limited geopolitical downside.

Toward Smarter Dealmaking in a Risk-Adjusted World

Today’s deal landscape is not defined by macro fundamentals alone but by the combination of political disruption and specific industry sector opportunity. As such, the M&A advisor’s toolkit must be recalibrated, not to eliminate risk (impossible), but to manage it intelligently.

Smart buyers are extending diligence timelines, building scenario models, insisting on MAE flexibility, and leveraging earnouts to bridge valuation gaps. Meanwhile, savvy sellers are structuring deals to maintain upside while offering buyers reassurance in the face of volatility.

In this environment, creativity and flexibility are as important as capital. Risk mitigation isn’t just a defensive tactic, it’s the key to unlocking deals that might otherwise stall.

CDI Global strategic cross-border transactions

CDI Global is a leading international middle-market advisory firm, specializing in strategic cross-border transactions. We have strategically supported companies on mergers and acquisitions (M&A) worldwide for over 50 years.

Whether you have a company already in your sights or you are looking for guidance for new opportunities, our cross-border industry expertise will help you find and execute the best deals. We combine M&A advisory, due diligence, macroeconomic forecasting, and financial structuring to provide complete solutions for our clients. Our teams on the ground in more than 30 countries have the local knowledge to follow market shifts and uncover both opportunities and pitfalls in potential mergers and acquisitions to ensure transactional success.

By: Kameron Rabizadeh, CDI Global Associate – USA