Situation with non-compete - thoughts?

searcher profile

March 16, 2025

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

The business is a Home Health Services & Medical Assistance company in the southwest. It is family owned & operated, comprises of over a dozen "unskilled" highly competent aides and a small team of skilled licensed professionals, one of whom most recently included the daughter of the owner. The sellers have agreed to a non-compete for 500 miles & for 5 years, however this excludes the daughter (she's exited the business 10 months ago after unsuccessfully convincing her parents to sell the business to her. She's clearly interested in the space and is closely connected to current clients, therefore was offered a series of very reasonable deal to return and help lead the team, however, she has refused. This would be a stock sale (contracts, licensing, etc.), the price is right, the team is legit, sellers are willing to provide a reasonable transition period, and have told the buyers not to worry about the daughter competing with them. The buyers are not afraid of a little competition (maybe they are), however they'd rather spend their time improving the business than competing with a well loved and influential daughter in the same space/area on day 2 of ownership.

I am an adviser and silent investor, and my thought to them is to buy the business as the price is right, and the value is there to capture now and the foreseeable future. They can't make the daughter sign a non-compete or stop her from entering the space. If you've experience this situation, please dm me and share your thoughts on what else they could do to either bring the daughter onboard the growth & leadership team or mitigate the impact of her entry. Thanks

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commentor profile
Reply by a professional
from Northwestern University in Chicago, IL, USA
If the daughter doesn't want to sign a non-compete, then consider asking her to sign a strong confidentiality agreement, non-solicit and non-disparagement - I think those provisions can be included in the purchase agreement. The confi provision will prevent her from using the information she learned from the business, the non-solicit will prevent her from directly soliciting the existing clients or employees and the non-disparagement will prevent her from talking shit about the business. She can still compete by reconstructing her own information and she may advertise for jobs where employees of the existing company apply for it, but she cannot solicit directly. This will buy the new owners some time, which I think it's all that they would need.
commentor profile
Reply by a professional
from Pace University in New York, NY, USA
Is she an equity owner in the business with her parents? will she get any proceeds from the sale? if so, can that amount be increased by her parents?

Maybe offer her a right of first refusal of the current buyers when they are willing to sell.

I would also advise that the sellers put in escrow some kind of deposit so that if the current buyers face an issue with the daughter anytime between closing and 6 months, they would earn that deposit to either increase marketing, hire a rentention company or something to give them an edge over the daughter that would not be coming from the new business they just acquired or out of their own pocket.

If you want to talk more you can reach me at redacted
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