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DE MINIMIS EXEMPTION SUSPENSION CREATES ACQUISITION OPPORTUNITIES

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September 22, 2025 | Articles Buy-side, Articles Sell-side

U.S. De Minimis Exemption Suspension Creates Acquisition and Succession Opportunities for Canadian Mid-Market Firms

The U.S. government's suspension of its de minimis exemption on Aug. 29, 2025, is altering trade dynamics across North America and presenting strategic advantages for Canadian companies in the $5 million to $50 million annual revenue segment.

Under Executive Order 14324, imports valued under $800 no longer receive duty-free entry or expedited customs processing. While this adds costs to low-value shipments from Canada, it enhances the competitiveness of Canadian exports under the U.S.-Mexico-Canada Agreement (USMCA). Goods meeting USMCA rules of origin qualify for preferential tariffs, often zero, compared with 10% to 60% duties on many Chinese imports. Estimates suggest U.S. households could incur an additional $136 annually on affected goods, increasing demand for reliable North American suppliers.

Canadian mergers and acquisitions activity rose nearly 70% year over year in the first half of 2025, reaching CA$113.7 billion in deal value, with mid-market transactions — those involving firms in this revenue range — expected to drive growth amid easing interest rates and trade shifts. Although Q2 deal volumes softened slightly, analysts anticipate a rebound in cross-border activity. For executives at mid-sized firms, this environment offers timely prospects for expansion through acquisitions or structured ownership transitions.

Trade Shift Positions Mid-Market Exporters for Advantage

The policy change is accelerating nearshoring trends, as U.S. buyers seek tariff-compliant partners. Mid-sized Canadian operations, with their balance of agility and scale, are well-suited to capitalize by strengthening supply chains and consolidating positions under USMCA protections.

Many firms in this segment export consumer goods, manufacturing components or e-commerce products to the U.S., where low-value shipments previously benefited from the exemption. Shifting to bulk strategies and compliance enhancements now provides a competitive edge. Federal programs, such as the Duties Relief Program, support supply chain investments, potentially yielding strong returns as preference for "Made in North America" sourcing grows.

Targeted Acquisition Strategies for Mid-Market Growth

Opportunities are emerging as smaller exporters scale back U.S. shipments due to added duties. For $5 million to $50 million firms, bolt-on acquisitions valued under $20 million in EBITDA align with the 2025 mid-market upswing. Sectors like consumer discretionary and manufacturing, which posted Q2 returns exceeding 12.5%, warrant particular focus.

Consider these approaches:

  • U.S. Distribution and Retail Assets: Acquire e-commerce or retail entities affected by higher costs on Chinese imports. This provides immediate access to U.S. warehousing, reducing border delays and enabling duty-free re-exports under USMCA. Subscription-based models show particular promise.
  • USMCA-Compliant North American Suppliers: Invest in suppliers in Canada or Mexico to ensure origin compliance and lower shipping expenses. Tariff engineering offers ways to mitigate U.S. price increases, particularly for manufacturers.
  • Domestic Consolidations: Target fellow Canadian exporters impacted by parcel duties to expand B2B capabilities and U.S. market penetration. Transactions under CA$50 million match recent Q2 patterns.
  • Logistics and Joint Venture Investments: Develop U.S.-based fulfillment capabilities for improved speed and regulatory adherence. Export Development Canada incentives facilitate e-commerce adaptations.

With inbound M&A gaining momentum, provincial grants can aid financing, setting the stage for a robust Q3.

Succession Planning Amid Evolving Trade Realities

Family-owned enterprises account for 60% of Canadian small and medium-sized enterprises in this revenue bracket, yet nearly two-thirds lack comprehensive succession plans. As 56% of owners contemplate retirement within a decade — and 43% consider sales — the de minimis suspension underscores the need for proactive measures. An estimated $2 trillion in assets could transfer in the coming years, but only 34% of firms have documented strategies in place.

Integrate trade resilience into succession frameworks:

  • USMCA-Aligned Ownership Structures: Incorporate trusts or holding companies to prioritize compliance during transitions, accessing intergenerational tax benefits. Remission applications can address duty-affected imports, especially in agriculture and energy sectors advantaged by China's retaliatory measures.
  • Next-Generation Nearshoring Initiatives: Assign emerging leaders to oversee U.S. acquisitions or joint ventures, fostering operations resilient to policy changes. Export Development Canada encourages such steps for e-commerce advancements.
  • Incentive-Driven Equity Transfers: Leverage grants for customs technology to fund buyouts, preserving enterprise value. Pressures on exporters serve as catalysts for enhanced family liquidity.
  • Guided Consolidations: Enable successors to pursue peer acquisitions, creating entities exceeding $20 million in revenue with stronger U.S. leverage. Disruptions in retail favor such moves.

Early documentation helps secure enduring legacies, supplemented by scenario-planning exercises.

Seizing the Moment for Sustainable Expansion

The end of the U.S. de minimis exemption represents a pivotal moment for mid-market Canadian firms to pursue acquisitions that solidify supply chains or implement successions that ensure long-term viability.

Engage professional advisors and connect with industry associations for policy insights. In the strengthening 2025 M&A landscape, strategic action can transform challenges into sustained growth.