In today’s evolving trade environment, private equity (PE) firms investing in Canadian businesses or considering acquisition targets that buy from or sell to Canadian companies must account for the increasing complexity of tariff compliance. The imposition of new tariff regulations – such as the recent 25% U.S. tariff on select Canadian imports – has amplified the regulatory burden on companies engaged in cross-border trade. As due diligence efforts expand beyond financial performance and operational efficiency, the ability of target companies to manage, comply with, and report on tariffs has become a key consideration in PE acquisitions.
The challenge lies in the rapid evolution of trade policies, the significant penalties for non-compliance, and the operational inefficiencies caused by outdated or manual compliance processes. TriVista explores the implications of tariff compliance on PE acquisitions, identifies the technological and operational strategies that can mitigate risks, and provides a roadmap for PE firms to ensure the long-term regulatory resilience of their portfolio companies.
The Growing Complexity of Tariff Compliance in Private Equity Acquisitions
International trade policies are increasingly volatile, shaped by national economic interests, supply chain vulnerabilities, and geopolitical tensions. Recent tariff policies, including increased duties on aluminum, steel, and manufactured goods, are projected to affect over $50 billion in cross-border transactions annually. For Canadian businesses operating in industries such as manufacturing, automotive, and consumer goods, these tariffs introduce heightened cost pressures and regulatory requirements.
For PE firms, these dynamics present a critical due diligence challenge. Companies with poor visibility into their tariff obligations may unknowingly accrue compliance risks, face financial penalties, or suffer operational inefficiencies that erode value post-acquisition. Key risk factors include:
Lack of visibility into global trade requirements: Many mid-market companies still rely on spreadsheets or fragmented ERP modules to track tariff exposure, creating significant blind spots in compliance.
Manual or outdated reporting processes: The complexity of customs classifications and country-of-origin rules makes manual tracking error-prone and unsustainable.
Increased regulatory enforcement: Government agencies are expanding their use of digital auditing tools, making non-compliant businesses more likely to be flagged for penalties.
Financial and operational disruptions: Unexpected tariffs, countervailing duties, or misclassified goods can lead to supply chain disruptions, price fluctuations, and increased working capital requirements.
Given these challenges, a proactive and technology-driven approach to tariff compliance is imperative.
The Role of Private Equity Firms in Addressing Tariff Risk
PE firms must incorporate tariff compliance as a core component of their due diligence and value creation playbook. In practice, this means:
Assessing Trade Compliance Maturity: During pre-acquisition due diligence, firms should conduct a trade compliance audit to evaluate the target company’s visibility into tariffs, duty drawbacks, and import/export classifications.
Quantifying the Financial Impact: Understanding the aggregate cost of tariffs, duties, and compliance overhead is crucial for accurate valuation modeling and risk assessment.
Identifying Gaps in Technology and Processes: Firms should assess whether the company relies on modern trade compliance platforms or still manages its obligations through manual processes.
Developing a Post-Acquisition Roadmap: Once an investment is made, PE firms should implement strategic initiatives to enhance compliance, including digital transformation and workforce training.
Digital Solutions for Trade Compliance
Leading PE firms are increasingly leveraging technology to enhance tariff compliance across their portfolio companies. Digital trade management platforms can automate critical compliance functions, providing real-time data visibility, reducing manual errors, and ensuring adherence to complex regulations. Key solutions include:
Global Trade Management (GTM) Systems: GTM platforms integrate directly with ERP systems to automate trade classification, duty calculations, and customs filings. These solutions streamline import/export workflows and improve regulatory transparency.
AI-Powered Trade Compliance Platforms: Artificial intelligence (AI) and machine learning (ML) are now being used to predict tariff implications, detect anomalies in trade data, and optimize duty minimization strategies. AI-driven platforms can assess historical transactions, identify misclassifications, and recommend corrective actions before regulatory audits occur.
Automated Tariff and Duty Calculation Tools: Real-time tariff calculation tools provide businesses with immediate insights into the landed cost of imported goods, ensuring accurate pricing models and profitability projections. These tools are particularly valuable for manufacturers and retailers managing international supply chains.
Blockchain for Trade Compliance Transparency: Blockchain technology is emerging as a game-changer for tariff compliance by creating immutable records of trade transactions. This level of transparency simplifies audits, reduces fraud risk, and strengthens regulatory trust.
Digital Customs Filing and e-Documentation Solutions: Automating the submission of customs documentation through cloud-based platforms minimizes human errors, accelerates clearance times, and reduces the likelihood of penalties or shipment delays.
Enhancing Portfolio Value Through Compliance Technology
Implementing digital solutions for trade compliance delivers tangible benefits across multiple dimensions:
Financial Impact: Automated compliance solutions can significantly reduce tariff-related costs and prevent penalties that can reach millions of dollars per violation.
Operational Efficiency: AI-driven automation minimizes the administrative burden on finance and logistics teams, allowing employees to focus on value-added activities.
Regulatory Confidence: Enhanced reporting accuracy and compliance transparency mitigate the risk of audits, fines, and reputational damage.
Competitive Advantage: Companies with robust trade compliance capabilities can negotiate better supplier contracts and access duty-saving programs that competitors may overlook.
For PE firms, ensuring tariff compliance through digital transformation is not just about risk mitigation, it is a strategic lever for value creation.
A Strategic Imperative for Private Equity Firms
As global trade regulations continue to evolve, tariff compliance must become a priority for PE firms investing in Canadian businesses. By embedding digital trade management solutions into portfolio companies, firms can unlock operational efficiencies, enhance regulatory resilience, and protect investment value. A structured approach—combining rigorous due diligence, strategic post-acquisition initiatives, and best-in-class digital tools—will position PE-backed companies for sustainable growth in an increasingly complex trade environment.
PE firms that proactively address these challenges will not only safeguard their investments but also position their portfolio companies as leaders in global trade compliance and operational excellence.
Sponsored by James Bandy and Joanna Serkowski. Contact us to learn more.