Just as many market participants were anticipating a rate cut in mid-2025, a fresh round of tariffs introduced by former President Donald Trump has reshaped the economic outlook. The policy move, targeting imported goods across several sectors has reignited inflation concerns, prompting the Federal Reserve to delay its long-awaited rate reduction. For business owners considering a sale, this development adds another layer of complexity to an already dynamic M&A environment.
How Tariffs Are Impacting Interest Rate Policy
Tariffs typically raise the cost of imported goods, which can drive up consumer prices. The Fed, tasked with keeping inflation in check, often responds to rising inflation by keeping interest rates higher for longer. This delay in cuts, intended to combat the inflationary effects of tariffs, has immediate downstream consequences for business valuations; especially in debt-fueled M&A transactions.
Why Higher Rates Mean Lower Valuations
Most private equity buyers rely on leverage to finance deals. When interest rates are elevated, the cost of borrowing increases, reducing the purchasing power of buyers. This often translates to lower EBITDA multiples and tougher negotiations for sellers. We’re already seeing this play out in real-time, with valuation compression in capital-intensive and margin-sensitive industries.
Sector Watch: Who’s Most at Risk
- Manufacturing & Industrials: Heavily impacted by tariffs and cost inflation.
- Consumer Goods: Facing margin pressure and pricing uncertainty.
- Healthcare & B2B Services: More insulated, with continued strong buyer interest.
How Sellers Can Respond
If you’re considering a sale in the next 12 to 24 months, it’s crucial to adapt. Focus on enhancing profitability, diversifying your revenue, and preparing robust financial documentation. Clean books, clear KPIs, and a forward-looking growth story are more important than ever in justifying value amid a tighter capital environment.
Capital 42’s Take
Macro headwinds like tariffs and interest rates are outside your control but preparation isn’t. We’re helping founders sharpen their exit readiness so they’re well-positioned regardless of broader volatility. A slower market doesn’t mean a dead market, it simply means buyers are choosier. And that’s where the right positioning matters.
Final Thought
While recent policy shifts may have delayed interest rate relief, they’ve also underscored the importance of strategic planning. If you’re wondering how current macro trends affect your business’s valuation or exit timing, now is the time to get clarity. Let’s start the conversation.
Disclosure
This news release is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, Capital 42 Advisors, and Hamilton Grant, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Securities and investment banking services are offered through Hamilton Grant, LLC Member FINRA, SIPC. Principals of Capital 42 Advisors are Registered Representatives of Hamilton Grant, LLC. Capital 42 Advisors and Hamilton Grant, LLC are separate and unaffiliated entities.
