When Decisions Matter.

Should I obtain a non-compete agreement from a Seller in the acquisition of a business?

Yes, if possible. Courts will generally construe non-compete agreements with a Seller in a business acquisition context with more leniency than when they are executed in conjunction with employment. A non-compete agreement must be carefully crafted and limited in geographic region, for a specified period of time and pertain only to specific, identified business activities. Consideration must be provided to a Seller in order for a non-compete agreement to be enforceable, which is often accomplished by allocating some portion of the acquisition purchase price to the non-compete. A Buyer should also be cognizant of whether the agreement adequately prevents a Seller from competing. For example, a non-compete agreement that is executed exclusively with a Seller’s company might not exclude the principals of Seller’s company from competing with Buyer.

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