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Noncompete Covenants in M&A: Structuring to Bind Sellers and Key Employees

Navigating FTC's New Rule Banning Most Noncompetes; State Laws; Recent Court Cases Regarding Enforceability

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Tuesday, July 30, 2024

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, July 5, 2024

or call 1-800-926-7926

This CLE course will offer guidance in drafting noncompete clauses for both sellers and key employees in connection with the purchase and sale of a business. The panel will examine the FTC's new rule banning most noncompetes, the rule's application in M&A transactions, and the interplay of the new rule with existing state noncompete laws. The panel will also review recent case law regarding the enforceability of noncompetes and discuss the impact of certain unique buyer and seller circumstances and how noncompetes can be tailored to address them.

Description

Covenants not to compete are a critical, and often closely scrutinized, component of any M&A transaction, and practitioners must be able to carefully craft these covenants in a manner that will stand up to post-closing judicial scrutiny.

The FTC's new rule and most states distinguish between the law governing covenants not to compete when incident to the sale of a business versus when these covenants arise solely out of employment. This means that noncompete covenants applicable to sellers in an M&A transaction must be approached differently than those applicable to key employees of the acquired company. With respect to sellers, the presence of reasonable consideration and a clear nexus between that consideration and the covenant is essential. As it relates to key employees, courts generally respect restrictive covenants in employment agreements for the duration of employment, and noncompetes can survive the term of employment for certain key employees if drafted to comply with new federal and existing state law.

In addition to enforceability issues, the appropriate contours of noncompetition restrictions are highly fact-dependent and require careful consideration of the circumstances of each individual buyer and seller. Failing to tailor noncompetition covenants to these circumstances can result in a seller being unreasonably restricted from future endeavors and/or a buyer being inadequately protected.

Listen as our authoritative panel analyzes covenants not to compete in M&A transactions.

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Outline

  1. Noncompete covenants incident to the sale of a business
  2. Key documentation
  3. Key provisions
  4. Merger clause
  5. Noncompetes for key employees: federal and state law limitations
  6. Including founders and major shareholders in noncompete covenants
  7. Enforceability
    1. FTC's new rule
    2. State laws

Benefits

The panel will review these and other critical issues:

  • What are some essential requisites to enforceability? How should noncompetition covenants be documented?
  • Where and when should noncompetition matters relating to a to-be-acquired business be addressed?
  • Why are noncompete covenants treated differently when part of an employment agreement?
  • What are some special circumstances that present unique drafting challenges? How can common pitfalls be avoided?

Faculty

Stockman, Benjamin
Benjamin E. Stockman

Partner
Venable

Mr. Stockman practices in all areas of labor and employment law. Ben has handled a range of legal matters involving...  |  Read More

Straga, Daniel
Daniel G. Straga

Partner
Venable

Mr. Straga is an experienced corporate attorney with expertise in mergers and acquisitions, divestitures, venture...  |  Read More

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Early Discount (through 07/05/24)

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Early Discount (through 07/05/24)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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