Every agreement for the purchase and sale of a business worth its salt contains restrictions on the seller’s ability to compete and solicit customers and employees after the closing of the transaction. Few agreements contain similar restrictions on the purchaser. Should they? Suppose that the purchase price for the business is seller financed, that is, paid to the seller over time, and/or subject to an earn-out, which is dependent upon the performance of the business. In this scenario, it makes sense for the seller to insist that the purchaser agree to a non-compete. Without that restriction, the purchaser could open a competing business, filtering funds from the purchased business to the competing business and thereby hampering the purchased business from being able to make payment of the purchase price to the seller. Certainly, this risk can be mitigated by personal guarantees and collateral securing the unpaid purchase price. But the purchaser non-compete is another good way for the seller to protect itself.

If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at gsolomon@offitkurman.com or 443-738-1522.

ABOUT GLENN D. SOLOMON

gsolomon@offitkurman.com | 443-738-1522

Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 170 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our ten offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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