The Value of a Covenant Not to Compete

A NON-COMPETE covenant is one of the most important intangible assets of a familyowned business. Yet in negotiations for the sale of some businesses, it is frequently overlooked byboth the buyer, who stands to benefit the most from the covenant, and the seller, who doesn'tappreciate what he too can gain.

The retiring owner, eager to be free of the business, often settles for an up-front payment for”good will” that is something less than he could rightfully demand. The buyer, on the other hand,believing the seller has no intention of going into business again, doesn't insist on a non-competeclause. Six months later, the old owner, tired of golf, is back from Florida and setting up shop inthe same business.

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