A Tariff Change and a Buyer Who Wanted to Walk Away Cheap

The situation

By the time Yael and Tamar came to us, they had already tried handling the dispute themselves for nearly a month. Their outside accountant had run the buyer's proposed adjustment through the company's existing cost reports, found the numbers roughly matched, and told the sisters there was not much to argue. Yael had also spent two calls with Nikos, the buyer's finance lead, trying to walk through the figures line by line, using the same monthly cost summaries the company had always relied on, and had come away no further ahead; the summaries simply were not built to answer the question being asked of them.

Yael and Tamar owned a Waterloo manufacturer that supplied precision components to industrial equipment makers, a business worth somewhere in the $3 million to $8 million range that they had run together for over a decade. The company had been trading unevenly for the better part of a year, with margins compressed by rising input costs and a couple of customers slow to pay, and the sisters had started a sale process partly to get ahead of a cash position that was tightening month over month. A regional strategic buyer had signed a letter of intent and the deal was most of the way through diligence when a new tariff on a category of imported steel components landed, midstream, affecting a meaningful share of the inputs the company purchased from outside Canada.

The purchase agreement being negotiated included a change-in-law provision, a standard clause that lets the price adjust if a new law or regulation materially changes the target's costs between signing and closing. The buyer invoked it almost immediately, presenting a calculation showing the tariff would add several hundred thousand dollars a year to the company's cost base and proposing a purchase price reduction to match, capitalized over several years. Given how the company was already trading, the sisters could not simply walk away from the deal and wait for better conditions; they needed either to accept the cut or show it was wrong, and their first attempt at the second option had not worked.

The company's cash position added its own pressure to the timeline. A slow-paying customer had pushed out payment on a sizable invoice, and the company's line of credit was close to its limit, meaning the sisters could not easily fund another quarter of uneven trading while a dispute over price dragged on. Every week the deal stayed unresolved was a week the company's financial position could quietly get weaker, which was exactly the kind of leverage a buyer negotiating a price cut did not need to point out directly for the sisters to feel it.

What the other side was relying on

The buyer's calculation rested on the company's existing monthly cost reports, the same ones the sisters' accountant had used and reached a similar conclusion from. Those reports tracked total material spend by month but did not break costs down by which components came from tariff-affected suppliers versus domestic ones, an omission that had never mattered before because nobody had needed that level of detail for ordinary financial reporting; the company had always cared about total spend and total margin, not the origin of every individual part. To estimate the tariff's impact, the buyer's team had taken the company's total imported-materials spend for the prior year, applied the new tariff rate to the whole figure, and presented that as the expected cost increase, a method that is simple to run and easy to defend at a glance.

That approach was defensible on its face and, importantly, matched what the sellers' own numbers seemed to show when run the same way. The change-in-law clause did not require the buyer to prove the adjustment with precision; it only required a reasonable calculation of the cost impact, and a straightforward application of the new tariff to the company's total import spend looked reasonable enough, especially once the sellers' own advisor had essentially confirmed the ballpark. Nikos had told Yael directly that the number was 'about what your own accountant is showing us too,' which had done more than anything else to make the sisters doubt they had a real argument, since it is hard to keep pushing back on a figure your own side's numbers seem to support.

What the buyer had not done, and had no particular reason to do on its own, was separate the company's import spend by supplier and by whether that supplier's goods actually fell within the tariff's specific product categories. The new tariff applied to a defined set of steel components, not to imported materials generally, and the company's existing cost reports had never been built to distinguish between the two. The buyer's calculation assumed, reasonably but incorrectly, that the company's total import spend was a fair proxy for its tariff-exposed spend, an assumption that would only be wrong if a meaningful share of what the company imported fell outside the tariff's actual scope, which was exactly the question nobody on either side had actually checked before the number was presented as settled.

What we did

1. Requested the underlying purchase records rather than accepting the summary reports. Instead of working from the monthly cost totals both sides had already been arguing over, we asked the company's bookkeeper for the raw invoices behind a full year of import purchases, the level of detail the existing accounting had never needed to produce for ordinary reporting. Without that underlying detail, both the buyer and the sisters' own accountant had been forced to argue from the same imprecise summary, which is exactly why neither side had caught the error sooner.
2. Sorted every import invoice by product category against the tariff's actual scope. Working line by line through roughly a year of purchase records, we identified which specific components fell within the tariff's defined categories and which, despite being imported, were an entirely different type of part not covered by the new measure at all. This was tedious but necessary, because the dispute turned on a distinction the company's bookkeeping had never drawn, and no shortcut could substitute for checking each invoice against the tariff's own defined product list.
3. Rebuilt the cost base from the ground up. Once sorted, the tariff-exposed spend turned out to be well under half of the company's total import spend, because a large share of what the company imported was a category of fastener the tariff did not touch. This alone cut the buyer's projected cost impact roughly in half before any other adjustment.
4. Checked the buyer's capitalization assumptions separately from the cost figure itself. The buyer had projected the added cost forward for several years and capitalized it into a lump-sum price reduction using an assumption about how long the tariff would remain in effect. We flagged that this assumption had no support in the trade measure itself, which included a scheduled review date, and argued the projection period was speculative.
5. Brought in the company's own procurement lead to confirm sourcing options. Rather than treat the tariff-exposed cost as fixed, we had the person who actually managed supplier relationships explain that a domestic alternative existed for a portion of the affected components, at a modest cost premium, meaning some of the projected impact could be avoided by resourcing, which mattered because it showed the buyer the cost increase was not a fixed number the sisters had to absorb, but something the business had some ability to manage going forward.
6. Presented the rebuilt analysis directly to the buyer's finance team with the source invoices attached. Rather than argue percentages back and forth, we gave the buyer the same underlying documents we had used, sorted and labelled, so their own team could verify the corrected figure rather than take our word for it, which mattered because a number the buyer's own people had checked and confirmed independently was far harder to walk back later than one they had simply been asked to accept on trust.
7. Kept the sellers' original accountant involved throughout the correction. Rather than sideline the advisor whose earlier estimate had matched the buyer's, we worked with them to understand why the summary reports had missed the distinction, which meant the revised figure carried the sellers' own accountant's endorsement by the time it went to the buyer, turning someone whose earlier estimate could have undermined the sisters' credibility into a witness for the corrected numbers instead.

The outcome

The buyer's finance team reviewed the rebuilt analysis over about ten days and came back with a revised position: a price adjustment roughly a quarter of what had originally been proposed, reflecting the smaller, verified tariff-exposed spend and a shorter, more defensible projection period. That residual adjustment was not something the sisters fought further; a portion of the company's costs genuinely would rise, and conceding a modest, well-supported figure was a reasonable trade for closing the deal on schedule rather than prolonging a dispute the company's cash position could not comfortably absorb. The company's procurement lead also flagged, separately, that resourcing part of the affected components domestically could offset some of the remaining increase over time, which the buyer's team found reassuring even though it did not form part of the price negotiation itself.

The deal closed within the range the parties had originally negotiated, with the final price landing only slightly below the pre-tariff figure once the smaller adjustment was applied. Given that the company was trading unevenly through the whole process, holding the price this close to the original number, rather than accepting the buyer's initial cut, made a meaningful difference to what Yael and Tamar walked away with, and it meant the sale still delivered enough to clear the company's outstanding obligations and leave the sisters with a reasonable return after a difficult stretch of trading.

The turning point was not a legal argument about how the change-in-law clause should be interpreted. Both sides agreed on what the clause meant. The dispute was entirely about what the underlying numbers actually were, and it only resolved once someone went back to the source invoices and rebuilt the cost base from scratch, rather than continuing to argue from summary reports that had never been built to answer the question in front of them. Yael said afterward that the hardest part had not been the tariff itself, it had been trusting that a number both her own accountant and the buyer agreed on could still be wrong, and being willing to go back to first principles rather than accept a consensus built on an untested assumption.

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