Lighting M&A Update: How Tariffs and Supply Chain Chaos Are Shaping Today's Market

Geoff Ling | Managing Director

Derek Bobbitt | Associate

Updated: May 12th, 2025

The first 100 days of the new U.S. administration have been tumultuous to say the least. The tariff war has caused major disruption to supply chains, caused significant stock market volatility, and stoked fears of inflation and recession. For lighting business owners, this environment has introduced a new layer of complexity, but it has also opened strategic opportunities for those positioned correctly. Despite the turbulence, M&A activity in the lighting sector remains resilient, and with today’s tariff announcement bringing good news for China relations, the future is looking brighter. Here’s what we’re seeing on the ground, what it means for prospective sellers, and what to expect in the months ahead.

Active Buyer Trends: Strategic Footprints and Dry Powder Deployment

Despite the economic headwinds, we are actively marketing two lighting manufacturing businesses, and can confirm buyer interest remains healthy. Our team is seeing several notable trends:

• Private Equity (PE) Activity: Private equity firms are still highly motivated to deploy their record levels of dry powder. While some are sitting on the sidelines, most are looking past short-term volatility and focusing on acquiring resilient businesses at potentially more attractive valuations.

• International Interest: We are seeing a noticeable uptick in Canadian and European buyers seeking to establish or expand their U.S. footprint. For many, acquiring a U.S.-based manufacturer offers a way to mitigate new tariffs.

• Manufacturing Footprint Matters: U.S. companies with substantial domestic manufacturing capabilities are commanding premium interest from buyers. In contrast, companies heavily reliant on overseas suppliers must proactively demonstrate their ability to maintain EBITDA margins (or at least EBITDA dollars) despite supply chain volatility.

Seller Motivations: Accelerated Timelines and Owner Fatigue

The burden of running a business is now a major driver of sale decisions, even beyond traditional retirement planning. In today’s environment, many lighting business owners are finding that the day-to-day operational challenges are beginning to outweigh the rewards of independent ownership. We’re increasingly hearing from owners who, while not necessarily ready to retire, are fatigued by the constant need to:

• Monitor shifting HTS codes and trade policy updates

• Renegotiate supplier agreements and manage volatile input costs

• Adjust pricing strategies and navigate margin pressure

What’s Ahead: A Dynamic but Open M&A Market

Looking forward, we remain optimistic about sustained M&A activity in the market. A few key trends to watch:

• Tariff Uncertainty: A return to tariff escalations or trade policy shifts could create both challenges and opportunities for buyers and sellers alike.

• Interest Rate Environment: Continued inflationary pressures could keep rates higher for longer, impacting deal financing costs and buyer behavior.

• Supply Chain Reallocation: Companies that have taken tangible steps to diversify their supply chains away from countries targeted by tariffs may continue to command an increasing valuation premium.

Given these factors, preparation and positioning will be even more critical for prospective sellers. Although we may see lower valuations and less active buyers, the market is still open for those who are seeking an exit. In our experience, the standard competitive sale process will take 6 months, so the timeline for owners who are thinking about selling before the end of the year is shrinking. To help owners decide whether to start a sale process now or wait out the volatility, we’ve outlined a simple decision tool based on the most common factors shaping exit readiness.

This article was written for LightNow.

Merrimack Group is a boutique investment bank specializing in industrial and STEM companies, with particular expertise in the lighting and fabrication industries.