Purchase & Sale of Business

As 2018 looks to be a favorable M&A environment, many business owners may come to the conclusion that it is time to sell the family business.  While it is true that some businesses sell as a result of an offer that comes “out of the blue,” the reality is that most sales occur as a result of a well-designed process intended to maximize value for the seller.  Sellers should consider allocating considerable time preparing for a sale, sometimes as much as a year.  A well-run sale process can take considerable time as well.  The time is well-spent though, as thorough preparation and an organized sale process typically lead to higher valuations and quality buyers. 
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In connection with the purchase of a family-owned business, the buyer may seek a non-compete agreement from the selling owners and certain family member employees.  Such agreements are intended to protect the buyer from a seller’s competition with the business post-sale and from diversion of the customer relationships and goodwill that typically are part of the purchased assets.  Courts will generally enforce a non-compete agreement negotiated as part of a business sale as long as it is reasonable in geographic scope and duration.  What is reasonable will depend on factors such as the type of business being purchased, the pre-sale geographic reach of the business, and the consideration paid for the restriction on the seller’s future competition.  Parties to a non-compete should therefore carefully consider these factors when drafting the agreement.  The parties also should carefully define what type of “competitive” conduct will be restricted.   
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