"Non-Compete Agreements" Within Mergers And Acquisitions

Non-compete agreements are frequently used in merger or acquisition transactions. These agreements are mostly necessary to ensure the attainment of the desired results from the merger or acquisition transaction. Hence, in acquisitions, in order to ensure that the value of the right or asset acquired is fully transferred to the buyer, the seller might have to be placed under an obligation not to compete with the buyer for a certain period. This requirement may come up particularly in relation to building up a clientele and sufficiently exploiting the know-how acquired.

Definition of the Non-Compete Competition

Non-compete agreements are ancillary restraints. Ancillary restraints are restraints which are directly related to the concentration and which are necessary to the implementation of the transaction and to fully achieving the objectives envisaged by the merger or acquisition transaction.