What Business Buyers Must Understand About Risk Management in 2025

The Canadian M&A market rebounded strongly in early 2025. Deal value hit CA$113.7 billion in the first half of 2025, up almost 70%. Key sectors include energy, tech and infrastructure, but deals are harder to negotiate than before. Buyers face new layers of risk from market volatility, regulatory changes, and due diligence demands. The winners will be those who prepare thoroughly and act quickly – as one analyst notes, “sellers prioritized buyers who could close with speed and certainty, making capital readiness a true differentiator”. Below are the top risk factors and what buyers should do about them in 2025.

Another consideration is financial structure risk. Buyers should lock in financing before making an offer; having funding committed can be decisive in 2025’s competitive. Also consider currency and interest-rate exposure: if you need loans in 2025, anticipate higher borrowing costs. Where possible, secure fixed-rate financing for acquisitions to hedge future uncertainty.

The Changing Risk Landscape for Business Buyers

Risk in business acquisitions and investments has evolved significantly. Traditional risks such as financial instability and market competition remain, but new challenges have emerged:

• Economic volatility: Inflation rates, interest changes, and global supply chain disruptions affect business valuations and cash flow.

• Technological risks: Cybersecurity threats and rapid tech changes can impact operations and data security.

• Regulatory shifts: New laws on data privacy, environmental standards, and trade policies create compliance challenges.

• Environmental risks: Climate change effects and sustainability demands influence business continuity and reputation.

  
  

Understanding these factors helps buyers assess potential pitfalls before committing to a deal.

Assessing Financial and Market Risks

Financial health is a cornerstone of risk evaluation. Buyers should:

• Review audited financial statements for at least three years.

• Analyze cash flow stability and debt levels.

• Consider market trends affecting the target industry.

• Evaluate customer concentration risks that could threaten revenue.

  
  

For example, a buyer interested in a manufacturing firm should check if the company depends heavily on a few clients or if it faces rising raw material costs. These insights reveal vulnerabilities that might require negotiation or risk mitigation.

Navigating Technological and Cybersecurity Risks

Technology plays a critical role in business operations. Buyers must:

• Assess the target’s IT infrastructure and software systems.

• Investigate past cybersecurity incidents and current protections.

• Understand the company’s digital transformation plans.

  
  

A retail business with outdated payment systems may face higher fraud risks, while a tech startup with strong cybersecurity protocols could offer a safer investment. Buyers should also consider the cost and feasibility of upgrading technology post-acquisition.

Understanding Regulatory and Legal Risks

Regulatory compliance is often complex and varies by region. Buyers should:

• Identify all relevant regulations affecting the business.

• Review any ongoing or past legal disputes.

• Assess the company’s compliance history and risk management policies.

  
  

For instance, a food production company must comply with health and safety standards. Failure to meet these can result in fines or shutdowns. Buyers should work with legal experts to uncover hidden liabilities.

Environmental and Sustainability Risks

Environmental factors increasingly influence business value. Buyers should:

• Evaluate the company’s environmental impact and sustainability practices.

• Consider risks from climate change such as flooding or resource scarcity.

• Review any environmental liabilities or pending regulations.

  
  

A logistics company operating in flood-prone areas may face operational disruptions. Buyers can negotiate warranties or insurance to cover such risks.

Practical Steps for Effective Risk Management

To manage risks effectively, business buyers should:

• Conduct thorough due diligence covering financial, legal, technological, and environmental aspects.

• Use third-party experts for specialized assessments like cybersecurity audits or environmental impact studies.

• Develop a risk mitigation plan that includes contingencies and insurance.

• Negotiate contract terms that allocate risks fairly between buyer and seller.

• Plan for post-acquisition integration to address identified risks promptly.