Methods To Allocate Tariff-Related Risks In M&A Agreements

Key Takeaways:

• Parties to an M&A transaction should carefully consider the potential risks to the target business of the impact of newly imposed or future tariffs that may affect target businesses.
• There is no one-size-fits-all solution to allocating responsibility for tariff-related risks in M&A transactions.
• Insurers are unlikely to cover losses for breaches of representations and warranties related to tariffs, but it may be possible to minimize this representation and warranty insurance (RWI) coverage gap.

Buyers and sellers that are parties to an M&A transaction should carefully consider whether the risks associated with tariffs that have already been imposed or that may be imposed in the future may significantly impact the revenues and net profits of a target company business. If there will be a significant impact, it would be prudent to address those risks through various provisions of the acquisition agreement. For example, a buyer may seek an