In the current climate of escalating trade tensions, Canadian businesses are developing strategies to navigate tariff challenges and maintain their presence in the U.S. market. Leveraging mergers and acquisitions (M&A) as a tool to overcome trade barriers, companies are exploring new avenues to sidestep the risks posed by tariffs on their products.
Looking ahead, a trade war is likely to influence cross-border M&A activities. Canadian companies may be actively considering strategic acquisitions or even moving their operation to the U.S., which may include acquiring manufacturing plants to adapt to changing supply chain requirements. This shift towards cross-border deals underscores the evolving nature of international trade compliance and the adaptability of businesses in response to shifting geopolitical landscapes.
Buying a U.S. business as a tariff strategy
If you are considering purchasing a U.S. company to expand your manufacturing operations and enter the U.S. market, acquiring another manufacturing business in the U.S. can complement your existing Canadian operations. You could also potentially gain corresponding customers through an acquisition. By integrating these businesses, you can increase production capacity in the U.S. and establish a distribution network through a U.S.-owned entity. This approach can help mitigate the impact of tariffs and minimize business disruptions. Additionally, if you increase the size of your business you could negotiate a better deal with suppliers of key inputs.
Expanding your Canadian business
While it might make sense for a Canadian business to expand their presence into the U.S., there are important considerations for buying a business. This isn’t a quick decision that can be accomplished on a short timeline. It’s essential to consider the following issues:
Understanding the impact of U.S. policies on Canadian businesses, particularly in terms of acquisitions and supply chain consolidation.
Emphasizing the importance of thorough due diligence, understanding financial performance, regulatory compliance, and potential risks associated with cross-border acquisitions.
Highlighting operational efficiencies, cost savings, and the potential to acquire complementary customers as key growth opportunities when purchasing U.S. businesses.
Due diligence is paramount
Failing to navigate U.S. policies and neglecting thorough due diligence can result in substantial financial losses, encompassing unexpected costs, tax liabilities, and even possible bankruptcy. Additionally, ignoring regulatory compliance and local operating laws can lead to legal issues, fines, and lawsuits.
Furthermore, overlooking growth opportunities like operational efficiencies, cost savings, and acquiring complementary customers can hinder business expansion and competitiveness.
It is crucial for businesses to stay informed, compliant, and proactive to thrive and avoid detrimental consequences.
Navigating the buying process
While buying a U.S. business can be a complex and lengthy process, we have professionals that can provide expertise and direction. We can help with the following issues that many businesses face when trying to acquire a U.S. business:
BDO can guide you
Our comprehensive services also cover U.S. tax, transfer pricing, and expat services, providing a full suite of support for your cross-border business needs. BDO can assist with acquisitions to consolidate the supply chain for companies interested in buying a business in the U.S. as part of their tariff strategy.
Should you be interested in expanding your operations to the U.S., BDO can help you explore the possibilities while avoiding unnecessary risk. Reach out to our team of tariff readiness advisors to learn more about potential opportunities.
The information in this publication is current as of March 3, 2025.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.