Becker Private Equity & Business Podcast
Tariffs, Uncertainty, and the Deal Market: Insights from Matt Wolf of RSM 3-12-25
Wed, 12 Mar 2025
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.
Chapter 1: What are the current challenges in the deal market?
This is Scott Becker with the Becker Private Equity and Business Podcast. We're thrilled to be joined by one of our most listened to guests, Matt Wolfe from RSM, the most remarkable sort of mid-market private equity consulting firm. Matt's going to talk today about what's on everybody's mind, tariffs and a lot more. Matt, we're at a spot where deal activity just seemed to be picking up
Now we've got a little bit of a fly in the ointment, so to speak. This tier of thing is going bananas. What do we make of this? What does it mean for the deal market, for the 10-year, for inflation, and a lot more?
Yeah, great questions and ones we're talking about. hourly, right? I mean, I will say, like, I am no sort of policy expert by any stretch of the imagination. Maybe they're good, maybe they're bad in terms of policy. I don't know. All I know and what the data show are that it's, you know, creating a lot of uncertainty in
Chapter 2: How do tariffs create uncertainty for investors?
dealmaking and around investment decisions when there is no clarity or very little clarity on the breadth and depth and scope and frankly timing of tariffs. We've had many, many clients and sponsors take another look at deals, shelve investment, push things off because they're just waiting for more information. And we're seeing that uncertainty reflected in real time in the
in the tenure which has been on an absolute tear it's an it's an indication of the cost of capital right so we have not only do we have more uncertainty in the sort of overall business investing community and the deal making environment but the cost of capital is increasing right so the the cost of making the wrong decision is increasing and we have sort of the second and third order effects
that's really creating a lot of a lot of uncertainty and confusion and and you know again it's not for me to say whether they'll be good or bad i i don't know and i'm not going to comment on that all i know is that it's creating uncertainty which delays investment it makes it just makes it more difficult to get deals done i mean 100 and whether they're good or bad again the markets hate them inflation hates them the only people that like them are sort of
Chapter 3: What is the impact of cost of capital on deal-making?
And part of the target that Trump is trying to please, which is manufacturing workers, workers, target workers in some of these swing states where manufacturing in so many places has been shipped overseas. That's who likes him. He sees one stat that factory output is going up and is ignoring a lot of the other consequences. And we'll see how far he pushes this.
At some point, the rest of the American public will. is going to cry uncle, but at some point, until he starts to hear that and see such disastrous roles in other places, it seems like he might keep on pushing this. Just fascinating to watch.
Absolutely. And I think the other thing that perhaps those in the administration may maybe take for granted is just the the lead time on making these investment decisions. And to your points, maybe some of these defensive tariffs will encourage manufacturers to move operations back to the United States. Maybe. Right. But they. That's a very expensive decision to make that has a lot of variables.
Chapter 4: How do tariffs affect manufacturing decisions?
A lot needs to be thought through for any sort of executive, any operation, whether it's a farmer or even a consulting professional. Like, you know, whatever. Manufacturing doesn't matter what the business is. It's a very... expensive decision investment to move some centers of production and without certainty around, well, what are those future tariffs, future costs look like?
Chapter 5: What are the risks of making investment decisions during uncertainty?
It's a leap of faith to make some of those investments, and we're not seeing many companies do that.
Well, and that's a fascinating point because what happens is you have some of these big companies that seem to be trying to make sure they stay close to the president, making some big announcements about plants and building in the United States. But right, if the next president then reduces those tariffs dramatically, then you end up back to a spot where it's so much cheaper to invest overseas.
Chapter 6: How does political leadership influence business investments?
So it's very hard to make business decisions. based on what a president does, particularly when he does it without building broad alliance and consensus around it. And he may be right that it's the right thing or the wrong thing. I can't judge that. But what I do know is when there's so much anxiety around them and so much talk around them,
It's hard to get to that point where you have certainty and people could bank on these for the longer run to know that this is what's going to be in place. And that's probably more challenging when you don't build consensus on both sides of the aisle that you get whipsawed as a manufacturer. that you go and build things here or start moving production back here.
But in four years, it becomes a lot cheaper to do it elsewhere. Even in two weeks, if President Trump negotiates new deals with some of these potential partners, then you're up in a spot where you're starting to take actions, but not only the other side, but our own side is back and forth on these things. And that makes it very hard to do predictable business.
Absolutely, absolutely. Ultimately, the uncertainty, whether it's uncertainty from tariffs, regulatory uncertainty about the path of future interest rates, all of that uncertainty adds to the cost of making business decisions, whether it's where do you want to place a plant, where do you want to hire people, do you want to sell a division, do you want to buy a company?
All of that gets made more expensive through this additional uncertainty, regardless of the source. And right now, tariffs are a huge source of uncertainty for most executives, leaders, and investors that we're talking to.
Thank you. And what are you seeing with the treasuries? And what's going on with those? And what should we expect?
Yeah, it's a great question. You know, if I knew exactly the future path of the tenure, maybe we would be having this conversation on my yacht in the Mediterranean, but I don't. So, you know, what we're expecting, though, is that this uncertainty will continue to drive yields higher because of the increasing term premium.
So investors have less certainty about future duration, future policy, future uncertainty in general. So that spread between kind of the natural rate of the 10-year and the traded observed rate will continue to widen and it'll continue to
you know, we're watching sort of some of the, well, depending on the analysts and the banks you want to read and look at, you know, that sort of upper limit of 477, 48, somewhere 475 around there is kind of, depending again on who you want to listen to, who you want to read, is sort of the upper bound, the marker, you know, past that is the,
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