4 ms·

Does anyone know how the following situation would be addressed: Company Alice buys out Company Bob, along with all of Bob's clients. Bob's CEO "retires", but

Does anyone know how the following situation would be addressed: Company Alice buys out Company Bob, along with all of Bob's clients. Bob's CEO "retires", but then just starts a new company and calls up his old clients and starts poaching them back, essentially double dipping on the company purchase price. This totally theoretical situation may or may not be occurring to a friend of mine who is in Company Alice, and I wondered how a banishment of non-compete clauses would affect acquisitions.

ska 4y ago
Acquisition deals often include clauses to address exactly these sort of things, they include both carrots (e.g. earn out details) and sticks (specific prohibitions).
deleted 4y ago
[deleted]
hobotime 4y ago
Company Alice should amend their contracts with it's clients to preclude working with ex-employees - including Bob.
JumpCrisscross 4y ago
> Company Alice buys out Company Bob “The proposed rule would include a limited exception for non-compete clauses between the seller and buyer of a business“ [1]. [1] https://downloads.regulations.gov/FTC-2023-0007-0001/content.pdf https://downloads.regulations.gov/FTC-2023-0007-0001/content... page 5
mgerdts 4y ago
> As the Commission explains below, the definition of non-compete clause would generally not include other types of restrictive employment covenants—such as non-disclosure agreements (“NDAs”) and client or customer non-solicitation agreements—because these covenants generally do not prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. However, under the proposed definition of “non-compete clause,” such covenants would be considered non-compete clauses where they are so unusually broad in scope that they function as such.9F
RangerScience 4y ago
AFAIK - IANAL, and in California only - that's not covered under the non-compete stuff, it's covered under the value-of-sold-goods stuff, even if it's also mentioned as a specific exception to non-competes. CA blocks non-competes b/c you can't prevent someone from using their skills to make a living. Poaching clients back undermines the value of the thing you _just_ sold. It might be different if/when it's not a voluntary sale, and I bet there's ways to contract out of it - I've certainly idly daydreamed about clauses along the lines of "if you fuck up the product I just sold you enough, I can make it again and you can't stop me" - but TBH that probably just ends up as a "can't release a competing product within a year".

ska 4y ago

Acquisition deals often include clauses to address exactly these sort of things, they include both carrots (e.g. earn out details) and sticks (specific prohibitions).

deleted 4y ago

[deleted]

hobotime 4y ago

Company Alice should amend their contracts with it's clients to preclude working with ex-employees - including Bob.

JumpCrisscross 4y ago

> Company Alice buys out Company Bob “The proposed rule would include a limited exception for non-compete clauses between the seller and buyer of a business“ [1]. [1] https://downloads.regulations.gov/FTC-2023-0007-0001/content.pdf https://downloads.regulations.gov/FTC-2023-0007-0001/content... page 5

mgerdts 4y ago

> As the Commission explains below, the definition of non-compete clause would generally not include other types of restrictive employment covenants—such as non-disclosure agreements (“NDAs”) and client or customer non-solicitation agreements—because these covenants generally do not prevent a worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. However, under the proposed definition of “non-compete clause,” such covenants would be considered non-compete clauses where they are so unusually broad in scope that they function as such.9F

RangerScience 4y ago

AFAIK - IANAL, and in California only - that's not covered under the non-compete stuff, it's covered under the value-of-sold-goods stuff, even if it's also mentioned as a specific exception to non-competes. CA blocks non-competes b/c you can't prevent someone from using their skills to make a living. Poaching clients back undermines the value of the thing you _just_ sold. It might be different if/when it's not a voluntary sale, and I bet there's ways to contract out of it - I've certainly idly daydreamed about clauses along the lines of "if you fuck up the product I just sold you enough, I can make it again and you can't stop me" - but TBH that probably just ends up as a "can't release a competing product within a year".