By Michael Shea, Transworld in Tampa Bay | April 10, 2025
The global trade landscape is shifting—again. According to a recent Bain & Company analysis, tariffs are forcing executives across industries to rethink their capital allocation strategies, de-risk supply chains, and protect profit margins. For Tampa Bay business owners eyeing an exit or growth through acquisition, these macro forces are trickling down into the lower middle market (LMM) in ways that could redefine dealmaking in 2025 and beyond.
The Tariff Effect: By the Numbers
Bain’s Operations Executive Survey 2025 (n=181) paints a clear picture of how tariffs are shaking things up:
- Increased Costs: Nearly 40% of surveyed firms expect double-digit hikes in product input costs due to tariffs.
- Revised Forecasts: About 80% are reevaluating financial projections to account for tariff pressures.
- Shifted Priorities: Companies are redirecting capital toward supply chain resilience and technology, all while balancing debt repayment and dividends.
- Mitigation Moves: To offset costs, 67% are cutting expenses, 48% are tapping internal cash reserves, and others are exploring external financing.
So, Tampa Bay business owners, here’s the question: How will you fund your tariff mitigation efforts? Whether it’s diversifying suppliers or stockpiling inventory, these strategies come with a price tag—and they could impact your valuation when it’s time to sell.
Tariffs and M&A: Insights from the Front Lines
To dig deeper into how tariffs are affecting LMM deal activity, I leaned on insights from Axial’s network of M&A advisors—experts like Keith Dee of Osage Advisors and Jim Cohen of Madison Street Capital. Their perspectives reveal how tariffs are influencing everything from valuation expectations to diligence processes.
Q: How Are Different Manufacturing Verticals Affected?
Keith Dee points out that no industry is immune. “The cost of raw materials, supply chain disruptions, and pricing power all come into play,” he says. For Tampa Bay’s food and hospitality sectors—big players in our local economy—a drop in consumer confidence could compound tariff-related cost increases, hitting revenue hard.
Jim Cohen breaks it down further:
- Food & Hospitality: Higher costs for imported ingredients and equipment could squeeze margins unless passed on to consumers.
- Consumer Goods: Global sourcing means tariffs could raise production costs and limit product variety.
- Defense: Less impacted thanks to government contracts, but specialized imports could still drive up costs.
- Industrial Manufacturing: Steel and aluminum tariffs could disrupt production and supply chains.
Each sector’s exposure depends on its supply chain and ability to adapt—key factors buyers are scrutinizing right now.
Q: How Can Businesses Stay Ahead?
Keith Dee advises reducing reliance on volatile regions. “Diversify your supply chain wherever possible,” he says—a strategy that could resonate with Tampa Bay manufacturers looking to stabilize operations.
Jim Cohen offers a playbook:
- Diversify Suppliers: Source from low- or no-tariff regions.
- Go Local: Tap into domestic suppliers to dodge tariffs and cut shipping costs—a win-win for Florida businesses.
- Rethink Design: Use cheaper, tariff-free materials.
- Build Inventory: Stock up before tariff hikes hit.
- Partner with Suppliers: Negotiate cost-sharing or better terms.
These moves aren’t just about survival—they signal resilience to potential buyers, a critical edge in today’s market.
Q: How Is Due Diligence Evolving?
Tariffs are now a diligence focal point. Keith Dee’s key questions for sellers include:
- What’s your tariff management strategy?
- Do you have backup suppliers?
- How have tariffs hit your profitability?
- Can you absorb costs or pass them on?
Jim Cohen zooms in on five areas: valuation impacts, vendor reviews, market volatility, regulatory risks, and even opportunities—like leveraging tariffs to boost domestic production. For Tampa Bay sellers, being ready with data-driven answers can keep deals on track.
Real Deals, Real Outcomes
Two recent Axial case studies show how tariffs can make or break a transaction:
- Deal Paused: A metal fabrication company with 20% of its costs tied to a China-based factory hit a wall in December 2024. Despite a strong track record, the private equity buyer balked at tariff uncertainty, pausing the deal until post-election clarity emerges in late 2025.
- Deal On Track: A consumer products business, fully sourced from Asia, is set to close in Q2 2025. Why? The buyer sees tariff risk as an industry norm—costs will rise across the board, leveling the playing field.
The takeaway? Context matters. Industry dynamics and buyer risk tolerance can turn tariff exposure into a deal killer or a non-issue.
Getting Ahead of Tariff Risk in Tampa Bay
Tariff volatility isn’t going anywhere, and it’s already part of the M&A conversation. For Tampa Bay business owners, preparation is power:
- For Sellers: Quantify tariff impacts on your EBITDA, outline your supply chain strategy, and prove your pricing power. Buyers want facts, not guesswork.
- For Buyers: Target businesses with diversified supply chains, bake tariff risk into your models, and explore creative deal structures like earnouts tied to tariff outcomes.
At Transworld in Tampa Bay, we’re seeing these trends play out locally. If you’re wondering how tariffs might affect your company’s valuation or exit timeline, let’s talk. Through our Axial For Owners network, we can connect you with M&A advisors who specialize in navigating this exact terrain—keeping your deal on the right side of change.
This post blends the provided data with a regional lens, offering actionable insights for Tampa Bay business owners while maintaining a professional, engaging tone consistent with an M&A expert’s voice. Let me know if you’d like any adjustments!