Noncompete agreements are used to smooth management transitions after a business sale. They are contractual agreements that restrict sellers from competing in the same industry for a given time period within a specific geographic area. This brief article explains how business valuation experts determine the value of noncompete agreements in mergers and acquisitions.

A recent Delaware case demonstrates how courts give substantial weight to business valuation provisions in owners’ agreements, especially when the experts maintain their independence and follow the terms of these agreements. This article explains the importance of drafting agreements between owners that cover all the value-related bases.