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In today’s volatile economic climate—marked by trade wars, uncertainty surrounding tariffs, and geopolitical instability—investors face heightened risks when pursuing acquisitions. Navigating these challenges requires a disciplined approach to target selection, due diligence, deal structuring, and post-acquisition integration.
While economic uncertainty may deter some buyers, it also presents unique opportunities. Distressed assets, undervalued targets, and strategic bolt-on become more accessible. Some key factors for maximising value during these turbulent times are:
Strategic Target Identification: Focus on Resilience & Synergies
Not all businesses, even those within the same sector, are equally vulnerable to economic headwinds. Prioritise targets with:
- Recurring revenue models – businesses with non-cancellable contracts or subscription-based revenue streams
- Low cyclical exposure – market niches or revenue models that are relatively insulated from economic shocks
- Strong supply chain diversification – diversified sources of supplies and services
- Scalable cost structures – business models that minimise fixed operating costs to be able to scale up and down accordingly depending on business performance provide an element of stability and resilience in times of economic uncertainty
Additionally, look for strategic synergies—companies that can enhance your portfolio’s operational efficiency or market positioning. Assess the value chain as to whether there is an opportunity to work further up or down the value chain, or if possible, to create a “network effect” for customers. This is especially valuable when the target is deemed mission-critical by its customers, offering further protection during economic downturns.
Staged Due Diligence and Deepening Due Diligence
Consider staged due diligence, where initial checks (financial health, legal risks) are completed before in-depth operational assessments. This minimises sunk costs if red flags emerge early. Key steps to enhanced due diligence include:
- Preliminary financial assessment – Are the numbers truly as reported? Consider front loading some diligence procedures to assess key areas of concern, including the revenue model, business model, concentration/reliance risks.
- Geopolitical risk mapping: Assess exposure to tariff wars, regulatory changes, or sanctions.
Stress-testing financials: Model scenarios including supply chain disruptions, inflation spikes, and demand contractions. - Management evaluation: Ensure leadership has experience navigating downturns.
- Cybersecurity & compliance audits: Rising digital threats and regulatory scrutiny demand deeper tech/legal reviews.
Deal Structuring with Downside Protections
Given unpredictable markets, rigid upfront payments are risky. Flexible deal structures can align buyer and seller interests, enabling parties to bridge valuation gaps, while mitigating exposure for buyers:
- Earn-outs – Tie payments to future performance metrics (revenue, profitability, free cash-flow).
- Phased acquisitions – Acquire part of the business today, with options to acquire the remaining interest.
- Escrow accounts & holdbacks – Retain a portion of the purchase price to cover undisclosed liabilities and/or potential downside.
- Contingent value rights (CVRs) – Provide additional compensation if certain milestones are met.
Post-Acquisition Integration: Planning for Volatility
A detailed integration plan is critical—especially when economic conditions could disrupt operations. Key focus areas:
- Rapid cost synergies – Identify quick wins to improve cash flow.
- Cultural alignment – Retain key talent by addressing employee concerns early.
- Supply chain redundancies – Diversify vendors to mitigate trade risks.
- Scenario planning – Develop contingency plans for further economic deterioration.
Investors should also consider modular integration, where non-core functions are integrated gradually to avoid disruption.
Turning Uncertainty into Opportunity
While economic turbulence brings complexity, it also creates opportunities for disciplined investors. By refining target selection, staging due diligence, structuring deals with flexibility, and executing integration with precision, buyers can not only mitigate risks but also uncover undervalued gems.
For dealmakers, the key is agility—adapting strategies to evolving conditions while maintaining rigorous risk management. Those who do so will be well-positioned to emerge stronger when markets stabilise.
