Tariffs, Uncertainty, and the Deal Market: Insights from Matt Wolf of RSM 3-12-25
Digest
Scott Becker interviews Matt Wolfe of RSM, a private equity consulting firm, about the effects of tariffs on the deal market. The conversation highlights the uncertainty tariffs create, leading to delayed investment decisions and difficulty closing deals. This uncertainty is also driving up treasury yields because of a higher term premium, reflecting investor concerns about future interest rates and economic conditions. The discussion emphasizes the importance of considering the second and third-order effects of tariffs, such as their impact on the cost of capital, investment decisions, IPO attractiveness, and the flow of money into different asset classes. The podcast stresses the need for a comprehensive understanding of these ripple effects when analyzing the economic impact of tariffs.
Outlines
Introduction and Tariffs' Impact on Deal Activity
Scott Becker introduces Matt Wolfe from RSM to discuss how tariffs are creating uncertainty in the mid-market private equity deal market, delaying investments, and hindering deal closures.
Tariffs, Treasury Yields, and Cost of Capital
The discussion shifts to the impact of tariffs on treasury yields, explaining how increased uncertainty drives yields higher due to a rising term premium. The conversation emphasizes the importance of considering the second and third-order effects of economic events on investment decisions and capital flows.
Keywords
Tariffs
Taxes on imported goods impacting domestic industries, market uncertainty, trade wars, protectionism, and global economics.
Term Premium
Extra yield for long-term bonds reflecting uncertainty about future interest rates and economic conditions.
Cost of Capital
Company financing costs (debt interest, equity returns) increased by uncertainty.
Mid-Market Private Equity
Private equity investments ($25M-$1B valuations) sensitive to economic uncertainty.
Treasury Yields
Returns on US government bonds, influenced by economic uncertainty and inflation expectations.
Economic Uncertainty
Unpredictability in markets due to factors like tariffs and geopolitical events.
Investment Decisions
Choices by investors regarding allocating capital, affected by market conditions and risk assessment.
Q&A
How are tariffs impacting the mid-market private equity deal market?
Tariffs create uncertainty, delaying investment decisions and making deal closures difficult due to unpredictable costs and increased capital costs.
What is the impact of tariffs on treasury yields?
Tariff-induced uncertainty drives up treasury yields via a higher term premium, reflecting investor concerns about future interest rates and economic conditions.
What are the second and third-order effects of tariffs investors should consider?
Consider how increased capital costs affect investment decisions, IPO attractiveness, and the flow of money into different asset classes (treasuries vs. stocks). A comprehensive analysis requires understanding these ripple effects.
Show Notes
In this episode, Matt Wolf, Health Care Senior Analyst and National Health Care Business Valuation Leader at RSM, joins Scott Becker to discuss how tariffs and economic uncertainty are reshaping the deal-making landscape.
Table of contents
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