Featured by Carta: Tariffs bring uncertainty—and opportunities—for PE and M&A

The status of the new tariff regime announced by the U.S. in early April remains in flux, with negotiations that could reshape the international economy continuing to unfold as the year nears its halfway point.

In the first weeks after the initial tariff announcement, dealmakers proceeded with caution. More recently, however, spending in the merger market has been revving back up. 

In May, total M&A deal value in the U.S. climbed to $198.8 billion. That’s a 40% increase from April, when activity in the market declined due to widespread uncertainty over what trade duties would be implemented and when they would ultimately go into effect. 

In many cases, this uncertainty remains about the details of how some of the world’s biggest markets will interact in the years to come. Yet investors across all types of financial markets seem to have grown much more optimistic that the results will not be too tumultuous. After plunging in early April, major public stock indexes recovered to near all-time highs. In May, spending on M&A deals experienced a similar spike. 

But question marks remain. Even as deal value rises, the number of transactions taking place remains depressed. Total M&A deal count in the U.S. declined by 8% in May compared to April. On a year-over-year basis, transaction count in May was down 13%. And there appears to be a link between this decline in activity and the macroeconomic market. In an EY Parthenon report from May, almost 25% of PE GPs who were surveyed reported that they had experienced “deal disruptions” due to concerns about tariffs. 

Investors are responding to the prospect of tariffs in different ways. Some see it as a dislocation that could create attractive opportunities for deals. Others see it as a looming threat to their portfolios. But for every private equity and M&A professional, it’s a serious factor to consider. In the wake of a once-in-a-generation pandemic and a major reset in corporate valuations, dealmakers are now confronting their latest recent bout of macroeconomic uncertainty. 

Uncertainty breeds opportunity 

In her dual roles as the founder and managing partner at Regen Capital and the CEO and chairman at Dynamix, Andrejka Bernatova is actively pursuing investments in the energy, power, and infrastructure sectors in both the private and public markets. In a career that includes prior stints at Blackstone and Morgan Stanley, she’s learned that this sort of uncertainty is nothing new. Investing is inherently a business of peaks and valleys. 

But that doesn’t mean that it’s currently business as usual. In today’s market, Bernatova and her teams are looking for investments with particular appeal in the current market climate. 

“What we’re doing is figuring out where the opportunities are,” Bernatova says. “In a sort of perverse way, volatility can be good, because it does create more opportunities.”

For both PE firms and corporate buyers, this can be a common approach in these sorts of conditions, according to Kip Wallen, senior director of thought leadership at SRS Acquiom, a provider of various financial services related to M&A transactions that published a recent report on M&A deal terms. In an uncertain market, acquirers can be more inclined to look at opportunities on a deal-by-deal basis and to push beyond some of their normal boundaries. 

These sorts of special opportunities can take many forms, including deals with unique structures, investments in sectors where a fund might not always operate, or investments in companies experiencing financial distress or some other short-term dislocation. 

“Strategics right now are being very opportunistic,” Wallen says. “Buyers are more frequently looking at the opportunity, as opposed to, say, a perfect demographic target that checks all the particular boxes.” 

The impact of tariffs so far

Different types of companies and different types of private equity firms may have very different exposure to tariff-related changes. 



Companies that are reliant on international supply chains are likely to be impacted the most, according to Robert Lytle, a senior managing director at Stax Consulting who works with private equity firms and their portfolio companies on due diligence and value creation. 

“If I’m the CEO of an auto supply company, say, I’m not sleeping well at night,” Lytle says. “And I use that as an example, but any areas like that which are reliant on supply chains could be impacted. Portions of consumer, anybody in the industrial space, industrial services.” 

PE firms likely have a close eye on any portfolio companies operating in these sectors. But that’s only the first-order effect. Lytle cautions that investors should also be aware of any portfolio companies who serve customers who might be in one of these impacted industries, and how changes for those customers might trickle up to a PE firm’s bottom line. 

“If I sell to tier-two auto manufacturers, then I have a customer problem,” he says. “You have to go through your portfolio and think about these things very, very carefully to get a better idea of how a business is going to perform from either a revenue side or a cost side over the next several months.”

As a general rule, Lytle says, larger private equity firms are more likely to feel the effects of higher tariffs in their portfolios. These mega-cap firms are more likely to have the resources to invest internationally or in capital-intensive industrial sectors. Midcap firms and other smaller investors, he says, often lean toward industries that may have less tariff exposure, like software and services. 

He also notes that the uncertainty around tariffs have led some dealmakers to hit the brakes. Investors who were prepared to begin sale processes for portfolio companies during Q2 have opted to wait until market conditions are more clear. 

“We’ve been in a lot of conversations with people recently about quality assets that have just kind of sat there,” Lytle says. “From the seller’s perspective, they’re ready to go. Knock on wood, we’re hoping those are going to start coming out [to market] in Q3 and Q4.” 

Attitudes toward risk

Every investment comes with some degree of risk. But volatility can ramp up that risk factor. 



When considering deals in the current uncertain environment, Bernatova says she’s particularly concerned with mitigating risk and finding ways to protect herself and her LPs from negative outcomes. As an example, she points to the contracts that a company might sign with its customers, such as an energy company agreeing to provide power on certain terms. 

“There needs to be some sort of downside scenario that still works for investors,” Bernatova says. “For example, if you take a manufacturing business or an energy business, maybe you need a stronger contract that will not expose you to cost overruns. Maybe you have a higher price in terms of the engineering and operating contract, but at the same time, you have more certainty.” 

In other sectors, investors trying to adapt their approach for a volatile market might have different points of emphasis. A tech investor, for instance, might be more drawn than usual to companies with strong recurring revenue streams, high retention rates, or other signs of an established competitive moat. 

Implications of M&A uncertainty

This latest bout of tariff-driven market uncertainty comes at an awkward time for many players in the private markets. 

At the start of the year, many investors were eagerly anticipating that 2025 would be a strong year for M&A activity, providing a long-sought and much-needed chance for fund managers to generate liquidity for their LPs. The surge of deal activity in March was a promising sign on this front. April’s slump was less encouraging. If investors are more hesitant about making acquisitions, some companies that have been waiting for exit opportunities may have to wait a little longer. 

But the backlog of companies looking for liquidity isn’t going anywhere. If macro uncertainty persists, these two forces could come into increasing tension. 

“There are a lot of market pressures that are really pushing on the dam,” says Wallen of SRS Acquiom. “The dam has got to burst at some point, because there’s a lot of water behind it right now, in terms of capital available among buyers and maturing companies that might not have the luxury of taking a wait-and-see approach to their exits for much longer.” 

This type of market-driven tension is exactly the sort of strategic opportunity that many PE and strategic buyers are currently trying to seize. While activity may have slowed in the face of tariff-driven uncertainty, investors like Bernatova are still ready to put their capital to work. 

“Looking at it from a public-market perspective or from the perspective of our private platform, it’s a good environment to invest in,” Bernatova says. “We are seeing a lot of potential opportunities to consolidate. I think it’s going to be a very interesting environment over the next six to 12 months.”