Turning Tariff Risk into a Strategic Edge
The Challenge:
A financial sponsor was preparing to acquire a large U.S. distributor heavily reliant on overseas sourcing, primarily from China. The company faced substantial duty and tariff exposure—compounded by years of underpaid tariffs and a complete lack of internal expertise to assess or mitigate the risk.
Neither the sponsor’s deal team nor their advisors could accurately quantify the potential downside. The target’s management team lacked global sourcing capabilities and was entirely single-sourced, with no ability to pivot to alternative suppliers or explore low-tariff countries.
The situation was compounded by several critical issues:
No forecasting model to predict the impact of rising tariffs.
No infrastructure to build a resilient, diversified supply chain.
Significant financial risk, pricing pressure, and a weak post-close operating model.
Without intervention, the deal faced millions in potential financial loss and an unsustainable post-close environment.
Our Approach:
Quantum Performance Partners deployed its proprietary, patent-pending Quantum Tariff Insight Tool™, enabling near-instant analysis of the client’s complete duty and tariff exposure across all imported goods.
Our multi-phased, strategic approach included:
Mapping Exposure:
Identified all imported products, HTS codes, country-specific duty/tariff rates, and calculated baseline exposure using current sourcing models.
Benchmarking Alternatives:
Mapped viable alternative suppliers and low-tariff or zero-duty countries supplying the same goods to competitors.
Sensitivity Modeling:
Built “what-if” scenarios to model COGS increases if tariffs doubled or tripled, quantifying risk by product and supplier.
Optimizing the Supply Chain:
Developed a future-state global sourcing model with supplier recommendations, distributor contacts, and logistics pathways to minimize tariff impact.
Operationalizing Global Sourcing:
Established an internal global sourcing team within the portfolio company to manage supplier transitions and execution.
Boosting Gross Margin:
Built a pricing strategy to increase prices on long-cycle inventory—carefully positioned below competitor pricing—to improve margins and gain market share.
The Results:
Quantum’s comprehensive strategy transformed the company’s supply chain from a liability into a competitive advantage.
Substantial Purchase Price Reduction: Quantified tariff risk pre-close, enabling effective negotiation and significant cost savings.
Gross Margin Uplift: Achieved immediately through strategic price increases while remaining competitive.
$XM in Tariff Costs Avoided: Diversified suppliers across low-tariff countries, as quantified through sensitivity modeling.
Long-Term Supply Chain Agility: Established an in-house global sourcing function to manage supplier diversification and transition.
Competitive Market Positioning: Gained market share from competitors and prepared the company for future add-on acquisitions.