DealLawyers.com Blog

President Trump’s decision to impose unprecedented tariffs on nearly all countries has thrown markets into turmoil and have added another bundle of legal and business issues for dealmakers to consider as they work through potential acquisitions.  This excerpt from a recent Squire Patton Boggs memo highlights some of the tariff-related legal considerations that both buyers and sellers should keep in mind. Here’s an excerpt:

– Due diligence – Consider the impact on valuation and financial metrics, supply chains and production, product costs and profitability, demand and price increases, and the relative effect on competitors. Due diligence should focus on tariff exposure in supply chains, reviewing import classifications and historical compliance with trade laws.

– Purchase agreements – Address tariff-related risks through pricing mechanisms, representations and warranties, and indemnification provisions. Key terms such as “Material Adverse Effect” or “Material Adverse Change” and “ordinary course of business” must be carefully considered.

– Policy matters – Obtain real-time policy advice from experts “in the know” to develop effective strategies to address potential future impacts. Influence policy through lobbying efforts, trade groups or otherwise to ensure you are heard at the right time, by the right people

Other legal considerations identified in the memo include how the changes to the competitive landscape resulting from tariffs may impact the review of a proposed transaction by governmental authorities and the need to develop mitigation strategies to reduce the financial impact of tariffs.

One of the points raised in the excerpt I quoted is the need to consider the implications of the new tariff regime on MAE or MAC definitions. Over on LinkedIn, Prof. Stephen Bainbridge raised the question of whether the fallout from “Liberation Day” would trigger MAC clauses and whether we can expect to see changes in tariff policies join the events that are specifically addressed in future MAC definitions. We may have to wait a bit for the answer to his first question, but it seems to me that’s inevitable that future MAC clauses are going to address the impact of changes in tariff policies in one way or another. After all, experience suggests that every calamity that leaves a scar on dealmakers usually gets added to that list.

– John Jenkins