The first quarter of 2025 has delivered two forces pulling in opposite directions for Alberta dealmakers. On March 12, the Bank of Canada lowered its policy rate to 2.75%, its seventh consecutive cut and 225 basis points of easing since June 2024. Days earlier, on March 4, U.S. tariffs of 25% on Canadian goods, with a 10% rate on energy, took effect, and Canada answered the same day with 25% counter-tariffs on roughly $30 billion of American products.

Cheaper money argues for moving ahead with a transaction. A trade dispute of uncertain duration argues for caution. Neither instinct is wrong, and the useful question for an owner or acquirer is not whether to transact but how to structure a deal so that it survives the range of outcomes now on the table.

This post looks at valuation, earn-outs, material adverse change clauses, financing conditions and closing timelines through the lens of an Alberta buyer or seller trying to sign and close in the current environment.

The points below are general information. Owners should work with their legal, tax and financial advisors before committing to any particular deal structure.

Key Takeaways

• Lower borrowing costs after the March 12 rate cut improve buyer capacity, but tariff uncertainty is widening the gap between what buyers will pay and what sellers expect
• Earn-outs and other contingent consideration can bridge that gap when they are tied to metrics the seller can genuinely influence
• Material adverse change clauses deserve specific drafting on tariffs and trade measures rather than reliance on generic language
• Financing conditions and evidence of committed funds matter more when lenders are re-underwriting tariff-exposed borrowers
• Shorter sign-to-close periods and a clear regulatory timeline under the amended Competition Act reduce the window in which circumstances can change

Two Signals in One Quarter

The rate story is the more orderly of the two. The Bank of Canada held its policy rate at 5.00% from July 2023 until early June 2024, then began cutting on June 5, 2024. Two 50 basis point moves in October and December, followed by quarter-point reductions in January and March, have brought the rate to 2.75%. The next scheduled announcement is April 16, and while nobody can say what the Bank will decide, the direction of travel over nine months has been consistent.

The trade story is anything but orderly. The U.S. executive order of February 1 was paused on February 3 for thirty days, then implemented on March 4. Within days, goods that comply with the Canada-United States-Mexico Agreement were exempted, which softened the blow for many Alberta exporters. Separate U.S. tariffs of 25% on steel and aluminum took effect on March 12, and Canada extended its counter-tariffs to steel and aluminum products on March 13.

For an Alberta business, the combined effect is that the cost of debt has fallen while the visibility of revenue has, in many sectors, deteriorated. A deal signed today has to hold up both in a world where the tariffs are withdrawn within months and in one where they persist for years.

Valuation When the Forecast Has Two Columns

A lower cost of capital normally supports higher valuations. Buyers financing an acquisition with floating-rate debt are paying materially less than a year ago, and that saving flows into what they can afford. But valuation also depends on confidence in the cash flows being discounted, and confidence is exactly what a tariff dispute erodes. The practical result is that the spread between bids for well-insulated businesses and bids for exposed ones has widened.

Sellers can narrow that spread by doing the buyer’s homework before the buyer arrives. That means segmenting revenue by destination and customer, identifying which product lines are CUSMA-compliant and documented as such, and quantifying the share of input costs tied to U.S. steel, aluminum or other tariffed goods. A seller who presents a base case and a tariff-persistence case, each with a credible mitigation plan, negotiates from knowledge.

Buyers, for their part, should resist pricing every target as if the worst case were certain. Many Alberta businesses serve domestic customers, provincial infrastructure programs or the energy sector and have limited direct exposure. The discipline lies in matching the discount to the actual exposure rather than to the general mood.

Earn-Outs as a Bridge, Not a Crutch

When the parties cannot agree on a number, contingent consideration is the traditional answer. An earn-out pays the seller additional consideration if the business achieves specified results after closing, so the buyer pays for performance that materializes rather than performance that is merely promised. In practice, the details decide whether it builds trust or destroys it.

Sellers should push for metrics they can genuinely influence after handing over the keys, such as revenue or gross margin, rather than EBITDA measured after integration costs and head-office allocations they cannot control. The measurement period should be short enough that tariff outcomes, rather than years of unrelated management decisions, drive the result. Covenants requiring the buyer to operate in the ordinary course and maintain working capital are essential, as is a clear dispute mechanism. Tax treatment of contingent consideration is specialized, and the proposed capital gains inclusion rate increase, deferred in January to January 1, 2026, remains unresolved, so sellers should have tax advisors model any earn-out before agreeing to it.

Drafting for the Unexpected

Material adverse change clauses

A material adverse change, or MAC, clause allows a buyer to walk away if something sufficiently serious happens to the target between signing and closing. Generic MAC language usually carves out changes affecting the economy or the industry as a whole, which means a broad tariff regime may not qualify unless the target is disproportionately affected. Alberta parties are now negotiating explicit language: whether tariffs and counter-tariffs are excluded, whether a rate or duration threshold triggers the clause, and whether the test references the target’s revenue or margin rather than vague standards.

Financing conditions and certainty of funds

A buyer whose lender has not yet committed is a buyer whose deal can fail for reasons unrelated to the business. Sellers are increasingly asking for evidence of committed financing before signing, and buyers who can show a signed commitment letter, hold a real advantage. Where a financing condition is unavoidable, the purchase agreement should specify what efforts the buyer must make, what happens if the lender re-trades terms, and whether a reverse break fee compensates the seller if financing collapses.

Regulatory timelines under the amended Competition Act

Since Bill C-59 received royal assent on June 20, 2024, mergers that create market share above 30% or exceed prescribed concentration thresholds are presumed anti-competitive unless the parties rebut the presumption on a balance of probabilities, and the efficiencies defence is gone. Pre-merger notification applies when both the $93 million transaction-size threshold and the $400 million size-of-parties threshold are met. Most Alberta mid-market deals fall below those levels, but parties should confirm early, because a review adds weeks or months to the period in which tariff conditions can shift.

Financing the Deal After the March Cut

For acquirers using bank debt, the past nine months have been steadily good news. Floating-rate facilities have repriced downward with each Bank of Canada move, and the March 12 cut continues the pattern. Buyers are again weighing whether to lock in a portion of their acquisition financing at fixed rates rather than ride the floating rate lower. A blended approach, fixing part of the debt and leaving the remainder floating, remains a sensible default for many.

The complication is that lenders are looking at borrowers through the same tariff lens buyers apply to targets. A bank or credit union underwriting the acquisition of a tariff-exposed business will stress the cash flow, tighten leverage limits and insist on more covenant headroom than it would have six months ago. Buyers should build extra cushion into debt service coverage assumptions so that a temporary margin squeeze does not trigger a default in the first year of ownership.

Alberta has a diverse lending landscape, including ATB Financial, the chartered banks, credit unions and the Business Development Bank of Canada, and appetite varies by institution and sector. Vendor take-back financing, in which the seller defers part of the purchase price as a loan to the buyer, has also regained popularity as a way to close a financing gap while aligning the seller with post-closing performance.

A Practical Sequence for Alberta Buyers and Sellers

The businesses that will transact successfully this year are those that treat volatility as a structuring problem rather than a reason to wait. First, map the target’s actual tariff exposure by revenue, input cost and customer. Second, model the business under at least two scenarios and agree on which metrics will bridge any valuation difference. Third, draft the MAC clause, financing conditions and earn-out terms with the specific risks named rather than implied.

Fourth, secure financing commitments before signing wherever possible, and confirm early whether Competition Act notification or any other regulatory step is required. Fifth, compress the period between signing and closing. Every week between the two is a week in which a new tariff announcement, a change to the exemption list or a shift in lender appetite can complicate the deal.

At Pragma Capital, we take a strategic, top-down view of every transaction, and the current quarter is a reminder of why that matters. The rate cuts are real and the tariffs are real, and neither cancels the other. Alberta owners who understand their exposure, structure their deals with precision and move with discipline will find that a volatile market is still a market in which good businesses change hands on good terms.