What Is The Value Of A Non-Compete Agreement

My first deep experience in understanding competition contracts (many years ago) was in graduate school. At that time, the examples cited included only transactions between large publicly traded companies. As an expert in business valuation, I have found that non-competition bans on agreements involving tightly managed companies are “standard fair” – especially when the seller is not of retirement age. Since Hohenstein`s non-compete agreement prohibiting it only from competing with Danaher or Danaher`s subsidiaries and associated companies, there was no contractual right to require Hohenstein to work for a competitor to NetScout. … In any case, Hohenstein`s obligations from the [contract] expired twelve months after Hohenstein was installed for a subsidiary of Danaher… On July 14, 2015, when he became a NetScout employee. Its commitments not to compete with Danaher expired a year later, on July 14, 2016. Factors to consider The evaluation model should take into account the multipliers for each difference, with the likelihood that the seller or key staff will then be able to compete with the company. If the party concerned has no inducement, capacity or reason to present, the inability of competition may be worthless. This step involves determining an appropriate discount rate to calculate the current value of expected losses. Consider the weighted average cost of capital (WACC) used to finance the acquisition as a starting point. In general, cash flows from intangible assets are more risky than those related to tangible assets.

This additional risk would generally support a higher return to compensate the investor. However, since much of the risk in cash flow has already been eliminated by the probability adjustment (stage 2), it is unlikely that a significant risk premium (applied to the CMPC) will be appropriate. NetScout sued Hohenstein and sought an injunction and asked the court to prevent him from competing with the company. While the Supreme Court found that the non-compete agreement was enforceable in the 2011 contract between Hohenstein and Danaher and netScout, as the beneficiary of Danaher`s assignment, was entitled to apply that contract, the Tribunal refused to grant NetScout the injunction it had sought.

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