Potential tariffs could lead to an increase in defensive mergers and acquisitions, according to JPMorgan’s Lysaght
The increasing threats of tariffs could potentially lead to a surge in protective merger and acquisition (M&A) activity, according to Dwayne Lysaght, who serves as the co-head of mergers and acquisitions in Europe at JPMorgan. Lysaght expressed concerns about the impact of tariff threats on the global business landscape during a recent interview.
Tariffs are taxes imposed on imported goods, and they are designed to protect domestic industries from foreign competition. However, they can also lead to retaliatory measures from other countries, creating a ripple effect across the global economy. In recent years, trade tensions between major economies like the United States and China have escalated, resulting in the imposition of tariffs on a wide range of goods.
The uncertainty surrounding trade policies and the potential for further tariff hikes have left many businesses anxious about the future. In response, some companies may choose to pursue protective M&A strategies to safeguard their interests and mitigate potential risks. These strategies could involve acquiring competitors or suppliers, diversifying into new markets, or consolidating operations to achieve cost savings.
According to Lysaght, protective M&A activity is driven by a desire to secure supply chains, access new technologies, and achieve economies of scale. In times of geopolitical uncertainty, companies may feel compelled to take proactive measures to protect their businesses and ensure long-term sustainability. M&A can be a strategic tool for companies looking to navigate a rapidly changing and unpredictable business environment.
Lysaght also highlighted the role of private equity firms in driving M&A activity. Private equity investors are known for their ability to identify valuable investment opportunities and provide the necessary capital to support M&A transactions. As economic conditions evolve, private equity firms may play a significant role in shaping the M&A landscape and driving deal activity across various industries.
In addition to protective M&A, companies may also explore other avenues to mitigate the impact of tariffs and trade tensions. This could include implementing supply chain optimization strategies, negotiating with suppliers and customers, or seeking regulatory approvals to navigate trade barriers. By taking a proactive approach to risk management, companies can position themselves to withstand external shocks and capitalize on emerging opportunities.
Overall, the prospect of escalating tariffs and trade disputes has the potential to reshape the M&A landscape and drive increased consolidation across industries. As businesses navigate the complexities of a rapidly changing global trade environment, strategic partnerships and acquisitions may offer a path to resilience and growth. By embracing innovation and adaptability, companies can position themselves for success in an uncertain and volatile business climate.
