Non-Compete Question

searcher profile

May 19, 2021

by a searcher from Harvard University in Cambridge, MA, USA

Question for the community on Non-competes.

Here's the scenario:

• There are 4 owners (equity holders in the biz). • Only one of them works in the biz, and is the CEO / head "chef", so to speak. • One of them is the father of the CEO (well past retirement age), and the other 2 are investors - they are not "chefs". • I would be paying a premium multiple (2x Sales, I know, I know, don't get me started) for the business. • I want the CEO to signa non-compete.

1. But - do you have the other 3 owners sign a non-compete? 2. Would you compensate each to not compete in this scenario, given the premium multiple?

0
6
117
Replies
6
commentor profile
Reply by a professional
from University of Richmond in Dallas, TX, USA
If this is an SBA-funded deal the SBA will likely require all 4 to sign the restrictive covenants.
commentor profile
Reply by a professional
from University of Wisconsin in Raleigh, NC, USA
If you are paying a premium multiple, I would have all owners sign a non-compete.
commentor profile
+4 more replies.
Join the discussion