After Donald Trump’s reelection this week, companies may reevaluate their oversees manufacturing operations in response to the possibility of significant new tariffs. Deflecto Acquisition, which operates 9 manufacturing facilities cross the United States, Canada, the United Kingdom and China, could face these political headwinds as it seeks to complete its merger with Acacia Research Corporation. This all-cash deal is structured as a stock purchase, whereby Acacia intends to acquire Deflecto for $103.7 million.
Indianapolis-based Deflecto’s “products include emergency warning triangles and vehicle mudguards used by the transportation industry, various airducts and air registers used by the HVAC market and literature, sign holders and floormats used by the office market,” according to the deal’s press release.
This week, President-elect Trump announced his intention to levy a 60% tariff on Chinese-made products as well as a 10% levy on all imported goods worldwide. Analysts warn of retaliatory tariffs that will blunt trade and hinder supply chains. Some companies have responded by ramping up imports now in order to build a large inventory they can use while they decide how to react to any tariffs that go into place after Trump takes office again this January.
During Trump’s first administration, he faulted China for unfair trade practices in 2018 and levied moderate tariffs in retaliation. President Xi responded by increasing tariffs on U.S. goods, creating a spiral of retaliatory tariffs that reduced both Chinese imports as well as U.S. exports. By 2019, U.S. Treasury declared that China was manipulating its currency in order to artificially make their goods less expensive. This led to additional rounds of tariff increases.
In January 2020, just as the Covid-19 virus was spreading from China to the rest of the world, the US and China agreed to the “Phase One Deal,” whereby the two nations “agreed to the rollback of tariffs, expansion of trade purchases, and renewed commitments on intellectual property, technology transfer, and currency practices.” The Biden Administration largely retained Trump’s tariffs to this day.
Reshoring + FDI Job Announcements by year, 2010-2023
While many analysts blame tariffs for increasing consumer prices and blunting economic growth, others credit them for protecting U.S. manufacturers and extracting concessions from other nations. Since the 2020 pandemic, many U.S. companies have shifted manufacturing operations back home in light of the risks of supply chain disruptions and increased overseas costs. Neither Acacia nor Deflecto have indicated any plans to shift the latter’s China-based manufacturing to existing facilities in the U.S., U.K., or Canada.
According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly-announced transactions, Acacia is advised by law firm Baker Botts L.L.P. and Deflecto is advised by Vedder Price P.C.