Becker Private Equity & Business Podcast
Navigating Tariffs and Market Uncertainty: Value Creation in M&A with Chris Felderman of Palm Tree LLC 5-9-25
Fri, 09 May 2025
In this episode, Chris Felderman, Sr. Managing Director and Co-Head of Consulting at Palm Tree, LLC, joins Scott Becker to discuss how private equity firms and portfolio companies can navigate tariff-related disruptions, prepare for uncertain deal markets, and unlock value through operational consulting and strategic planning.
Chapter 1: Who are the hosts and guests of this episode?
This is Scott Becker with the Becker Private Equity and Business Podcast. Thrilled today to be joined by Chris Feldman. Chris is the Senior Managing Director and Co-Head of Consulting at Palm Tree LLC. Palm Tree is a remarkable mix of a consulting firm, an investment bank, and really, really bright, bright people.
We're going to talk to Chris today about sort of the deal market, the business market, and in light of tariffs, some economic concern that seems to be up and down, some days really positive, some days a little more concerning, but just a world in which there's a lot of uncertainty.
Chris, before we get started, can you take a moment to introduce yourself and tell us a little bit about yourself and Palmtree?
Chapter 2: What is Palm Tree LLC and what services do they offer?
Sure. Thanks, Scott. It's great to be here. As you said earlier, my name is Chris Felderman. I'm a senior managing director here at Palmtree. I lead our Chicago office and I oversee the operations of the firm's consulting practice. Palm Tree, we like to consider ourselves the modern M&A and operations advisory firm.
And our primary objective, especially of our consulting offering, is to provide perspectives on financial and operational data to enable buyers and sellers to make more informed decisions to drive value creation. We typically provide support, well, we can provide support across the entire investment lifecycle.
Chapter 3: How does Palm Tree LLC support pre-transaction and post-close activities?
Pre-transaction, our offerings include financial and operational due diligence, so think quality of earnings. We also provide pre-closed accounting and finance operations diagnostics around the people, process, and systems, as well as data and analytics assessments.
And post-close, our transitional offerings are generally focused around the things that companies taking on institutional capital for the first time typically have not focused on, which includes accounting and finance support, enhancing that and optimizing the financial reporting process, cash management, networking capital management, improved process documentation, and even interim support such as CFO, VP of Finance, or Director of FP&A and the like.
And on the performance improvement and value creation side, we offer solutions like auto preparedness, financial forecasting, and budgeting enhancements. data and analytics improvements and implementations, as well as operational assessments and improvements that provide true value creation and enhance enterprise value. And we do this through a solution.
We offer these solutions through a bench of nearly 100 professionals across our four main offices in L.A., Chicago, Detroit and Dallas, many of which have prior big four corporate finance or investment banking experience.
Chapter 4: Why is operations consulting critical in uncertain markets?
Thank you. And take a moment, you know, in this time where M&A is a little bit softer and just starting to maybe get moving again, there's been so much discussion of tariffs, uncertainty, and so forth. How important is operations consulting and businesses just having their house in order and in great shape to make sure they're thriving either way?
How important is that part of the business to your customers?
Chapter 5: What are the challenges faced by private equity firms due to tariffs?
Yeah, I think it's especially important for private equity-backed portfolio companies that, you know, whether they're purchasing raw materials on an import basis or whether they are, you know, manufacturing overseas and need to bring that product back to the back state side. I think now is a time to really assess what the costs of those imports are doing. And I think
Our sense is that these announcements, and generally speaking, the uncertainty around them is absolutely increasing challenges for PE firms. And it's not only in the operations of their portfolio companies, but it's also in their ability to source, evaluate, and ultimately close on those new investment opportunities. And I can
go into some detail on some of the short-term risks and opportunities that they can look into, and then maybe some of the long-term as well.
No, I think that'd be great. I mean, there was just a recent article in the Wall Street Journal about increased challenges and people trying to figure things out through that, as well as recent talk by Mark Rowan, the CEO of Apollo, about challenges and almost a pause in the M&A environment.
Chapter 6: What are the short-term and long-term challenges in the M&A market?
What is your sense of some of the shorter term challenges, the longer term challenges, and what people could do about that?
Yeah, in terms of the shorter term challenges, I think immediate term, portfolio companies, their management teams, even the deal teams that are working on them on the sponsor side, they really need to identify the product and supply chain exposure that each of their portfolio companies have, meaning what key costs either are affected or are going to be affected by current or pending tariffs.
Maybe they manufacture goods in another country, maybe they import raw materials for production here in the US. Once they understand that, they then need to assess the effect of the cost increases on both profitability and liquidity. How much inventory can the company pre-buy Or how much of any cost increases can it absorb before having to pass some of those costs along to its customers?
And how sensitive will the customer base be to those increases? Or are they able to negotiate something mutually beneficial with their vendors to help preserve their margins? And in the case of pre-buying inventory to avoid any short-term tariffs, what are the downstream effects of tying up working capital in that way?
I think those are some of the key immediate and short-term assessments that need to be made. And then over the longer term, it's perhaps assessing things like the ability to move suppliers or whether products can be redesigned with components that don't have as much exposure to tariffs. But obviously, those take a little bit longer to play out.
And given the uncertainty right now, it might not be necessary, but it's something that can absolutely be planned for for the longer term.
Thank you. And then in the services world, you know, outside of that sort of the sort of hardcore goods world, are you seeing a different take on tariffs or similar concern? What do you see here out there on the services side versus the good side where people are importing goods and so forth?
Yeah, well, I think the services side is less prone to the tariffs and that quite honestly, might be where we see an uptick in deal activity, which is more focused on services and items that don't need to be sourced from outside of the United States.
So if there is a potential silver lining to the environment we're in from a deals perspective, I would imagine that's where a lot of the deal flow will begin to come from if the uncertainty continues.
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