Sold my manufacturing business last year. The non-compete seemed straightforward at signing: 3 years, 150-mile radius, can't work for or advise a competitor. I thought I was compliant because I didn't take a job with a direct competitor. Then the buyer's lawyer sent a letter. Turns out my consulting arrangement with a former supplier, who also sells to my old company's competitors, counted as "indirect competition." It wasn't explicit in the agreement, but their reading was broad. Cost me $12k in legal fees to untangle and I had to end the consulting gig. Lesson: get the definition of "competitor" and "indirect" nailed down in writing before closing, and have your own lawyer review the non-compete, not just the purchase agreement.
non-compete
What I learned about non-compete compliance post-closing
The definition of "competitor" is almost always the trap. In my sale, the buyer tried to include any business that "could reasonably be seen to compete." That language is useless for compliance planning. I negotiated it down to a named list of specific companies and a clear product category. Took two extra weeks but was worth it.
Did your lawyer actually read the non-compete? Mine skimmed it. Most deal lawyers focus on the purchase price and indemnification, not the restrictive covenants. I left left mine unchanged and regret it.
Indirect competition is the worst phrase. I was told by my attorney that advising a friend's startup—unpid—might violate if the startup later entered a related market. Unpaid didn't matter.
Three years, and 150 miles sounds standard but the radius can be a real problem if you stay in the same region. I moved two towns over and still had to turn down a board seat because the company had a small division that overlapped. My advice: think about every possible relationship (employment, consulting, board, even informal advising) and map it against the exact wording. Also, get a written acknowledgment from the buyer when you take a new role—before you start. It creates a paper trail if they later object
What was the range they demanded?
A lot of sellers think the non-compete only applies if they open a competing business. But employment with any company that has a competing division is often included. I know someone who took a sales job at a large distributor and got a cease-and-desist because one of their product lines competed.
That's exactly the scenario I was worried about. The buyer's counsel in our deal argued that even a side consulting gig with a supplier who sold to competitors counted. We eventually got a carve-out for passive ownership and for any supplier relationship that existed prior to closing. The key was listing those relationships in the agreement itself.
Has anyone had success with a narrow, product-specific definition? Or do buyers always insist on broad language?
Mine didn't have a product-specific definition. It said "any business that competes with the Company's business." The lawyer's letter cited that phrase and argued my consulting was indirect competition. I won't sign anything again without a precise list of what I can and can't do, and a name-by-name list of who counts as a competitor.