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Master Non-Competes in IT M&A: Protect Your Deal
EPISODE 220. Matt Lockhart and Ryan Barnett discuss the importance of non-compete and non-solicitation clauses in M&A deals for tech services companies. Non-competes protect buyers’ interests by preventing sellers from using their knowledge and relationships to compete. Duration can range from one to five years, with shareholder agreements often lasting five years. Scope should be specified to avoid overly broad restrictions. Enforceability varies by state. Non-solicitation clauses protect against employee poaching. Consideration for non-competes can include cash. Sellers should carefully review these clauses with legal counsel to ensure they are market-standard and not overly restrictive.
️ 1. What’s the real purpose of a non-compete clause in an M&A deal?
Sets the stage — you’re establishing that these aren’t just “standard boilerplate,” but real tools for protecting the buyer’s investment. It also shows that you get why buyers insist on them.
️ 2. How long and how broad should a typical non-compete be in IT services M&A?
Matt can share “market standard” ranges for duration (1–3 years? 5 years?) and scope (regional vs. national vs. global). It’s a super practical question that your audience will care about — they’re probably Googling it right now!
️ 3. What’s the difference between a non-compete and a non-solicit clause?
Many sellers (and even some buyers) confuse the two. This question lets Matt explain how they overlap and where they differ — adding clarity for your listeners.
️ 4. Are non-competes really enforceable? Or do some states or countries treat them as worthless?
There’s a lot of confusion (and myth!) around whether these are even enforceable. It’s a chance to cut through the noise and talk about how jurisdiction and real-world enforcement actually play out in deals.
️ 5. What’s the risk of agreeing to a non-compete that’s too broad?
Sellers need to know that signing an overly broad non-compete can kill their ability to start a new business down the road. This question lets Matt highlight the hidden risks and why careful negotiation matters.
️ 6. How can sellers negotiate a more balanced non-compete clause?
This makes it practical — Matt can share tactics or language that can help sellers carve out reasonable carve-outs, narrow the scope, or tie the clause to actual buyer concerns (not just blanket restrictions).
️ 7. What’s one of the biggest mistakes you see sellers make when reviewing these clauses?
A “closing” question that lets Matt share a cautionary tale or real-life example — which always resonates with listeners and makes the advice sticky.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.
EPISODE TRANSCRIPT:
00:00 | MattHello, and welcome to this week’s episode of the Shoot the Moon podcast, brought to you by Revenue Rocket. For those who may be new, Revenue Rocket is the world’s premier M&A and growth-strategy advisor for tech-enabled services companies worldwide. I’m here with my partner in crime, Ryan Barnett. Our fearless leader, Mike, is out again today but looks forward to being back next week. Ryan, how are you doing?
00:44 | RyanHey, Matt—I’m doing great, and thanks for joining today. If you’re listening to this podcast, we focus on practical issues in mergers and acquisitions for IT services companies. So if you’re an MSP, CSP, application developer—anyone in tech services—trying to understand today’s market, Shoot the Moon is for you.
Today we’re talking about something a little long-tail but important: non-compete and non-solicitation clauses that show up throughout legal agreements in the M&A process. You can see them as early as letters of intent, sometimes even referenced in NDAs. Matt, get us going: what’s the purpose of a non-compete clause in an M&A deal?
02:00 | RyanMatt, you might be on mute?
02:07 | MattOh—thank you for the edit, Maddie. Yeah, great question. Non-competes and non-solicitations are critical parts of the legal agreements between buyers and sellers. From a buyer’s perspective, they protect both the business being acquired and the buyer’s existing business. They help ensure a seller doesn’t use knowledge or past relationships to compete in like services. In practice, they set the framework for protecting customers, employees, and contracts—the big three. There’s what’s “market” (standard) and what’s not; sometimes parties try to overreach and “land-grab” too much protection through these clauses.
04:07 | RyanThat’s a great intro, and it leads to my next question. With legal agreements, I think in terms of negotiation points. For a non-compete, there’s usually a duration component, some geographic scope, and definitions that narrow the focus. What’s market-standard for durations and scope?
04:40 | MattAn important distinction: are you selling out or selling in? Selling out means you sell the business and move on after a short transition. Selling in means you’ll be part of the business going forward—often as a shareholder.
In a sell-out, you’ll see non-compete/non-solicit durations as short as one year or as long as five. The market “bell curve” is around three years. If you’re selling in—especially becoming a shareholder—your shareholder agreement will also include these clauses, and five years is often typical in that context.
06:33 | RyanOn scope: if I run a managed service provider today and want to open a karate studio, that’s probably fine. But if I want to start, say, an AI automation practice, do non-competes typically define what you can or can’t do? How specific do they get?
07:13 | MattThey should be specific, Ryan. Overly broad non-competes are a problem. Specificity can include services offered, technologies, vendor/channel relationships, and geography. For example, for an MSP, it’s reasonable to specify CSP/cloud resale, procurement of hardware, managed services, etc.
If a seller wants to stay in tech but move into, say, ERP integration for a different customer segment (upper-midmarket/enterprise), with different tech and services, that can be truly non-competitive. That’s why the definitions matter: a good agreement protects the buyer without blocking unrelated pursuits.
09:48 | RyanGreat nuances. Quick note—we’re not lawyers, and we’re not pretending to be. These are clauses we see often, and it’s a practical question we get: Are non-competes actually enforceable? States like California, Texas, and Minnesota treat them differently. In general, how enforceable are they, and what recourse does a buyer have if there’s a violation?
10:54 | MattEnforceability is legal-jurisdiction and language-specific—work with your attorney. Generally, any party can bring a matter to court; injunctions are possible. If harm can be clearly demonstrated, agreements typically outline remedies, penalties, or other recourse. The key is balanced drafting: adequate, fair protection—not overly broad—and clarity about what triggers enforcement or payment.
12:52 | RyanYou’ve been saying “non-compete” and “non-solicitation” together. What’s the difference?
13:25 | MattSimply: non-compete = don’t compete for customers. Non-solicit = don’t solicit employees (and often don’t solicit customers directly). Both are vital. In tech-enabled services, talent is like gold—people businesses rely on key employees. Buyers need protection against a seller poaching staff and, of course, against chasing customers.
14:32 | RyanSo, non-compete covers the business as a whole; non-solicit says don’t poach employees or customers. Similar, but handled in separate clauses.
14:56 | MattRight. And we’ve seen this get real when it involves other shareholders. Not just founders—minority shareholders often sign their own non-compete/non-solicit. Sometimes those individuals later pursue opportunities using their networks. So think in the context of everyone bound by these clauses, not just the main seller.
16:13 | RyanWe’ve also seen NDAs from private equity firms that own many subsidiaries. Any advice for a seller when a sophisticated buyer tries to strike non-solicit or non-compete language early?
17:20 | MattWe have seen that. It often comes up early, during opportunity assessment. Some NDAs reference non-compete/non-solicit concepts to protect against misuse of information (employee lists, customer lists). Sellers want assurance that shared info won’t be used competitively if a deal doesn’t move forward. If a buyer tries to strike protections, come back to “what’s market” and what’s appropriate at each stage (NDA vs. definitive agreements).
19:02 | RyanWe’ve recently come across deals with explicit cash consideration for a non-compete. Why would an LOI or final structure include that?
19:26 | MattA few reasons. Sometimes it’s hard to cleanly delineate scope—think AI, where the landscape changes weekly. A buyer might ask for broader-than-market coverage because they can’t precisely specify. That’s tough for a seller to accept—unless there’s monetary consideration.
More commonly, consideration ties to employment agreements. If, as an employee of the post-close company, you’re asked to sign a more restrictive non-compete than the deal docs, it’s fair to seek additional compensation tied to that restriction.
21:50 | RyanCommon mistakes sellers make when reviewing non-compete clauses?
21:59 | MattSigning something too broad, too long, or too restrictive because “I’m leaving the space anyway.” Plans change. Do what’s market, and work with your lawyer—even if you don’t expect to return—because opportunities can arise during the non-compete period.
23:17 | RyanFounders get antsy and want to get back to work—often in familiar areas. Last question: what advice do you give someone on a two-year non-compete?
23:36 | MattFollow it. Don’t break it. It’s a slippery slope to rationalize: “It’s not exactly the same service,” “They like me better,” etc. There’s rarely justification if you’re crossing the line. Understand the boundaries, live within them, and don’t toe the edge.
24:34 | RyanI thought you were going to say, “Go play more golf.”
24:37 | MattSometimes! And with June in Minnesota upon us, golf is definitely on the horizon.
24:52 | RyanI appreciate the discussion. Non-competes aren’t just boilerplate—go past the template and understand what you’re signing. If you’re a seller, you’ll try to shorten duration; if you’re a buyer, you’ll try to lengthen it. Enforceability varies by jurisdiction, and explicit consideration can strengthen the clause and set expectations. The goal isn’t to be punitive; it’s a negotiation point that deserves real discussion. Matt, any closing thoughts? Take us home.
26:08 | MattGreat topic—and an important one. There’s nuance here. Work with an experienced M&A attorney; they’ll help you understand what’s market and what’s not. Be open about your situation and future plans. A non-compete/non-solicit shouldn’t be a deal-breaker—if it is, step back and reassess the overall opportunity. With that, we’ll tie a ribbon on this week’s Shoot the Moon podcast. Hope you enjoyed it—come back next week!
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By EPISODE 220. Matt Lockhart and Ryan Barnett discuss the importance of non-compete and non-solicitation clauses in M&A deals for tech services companies. Non-competes protect buyers’ interests by preventing sellers from using their knowledge and relationships to compete. Duration can range from one to five years, with shareholder agreements often lasting five years. Scope should be specified to avoid overly broad restrictions. Enforceability varies by state. Non-solicitation clauses protect against employee poaching. Consideration for non-competes can include cash. Sellers should carefully review these clauses with legal counsel to ensure they are market-standard and not overly restrictive.
️ 1. What’s the real purpose of a non-compete clause in an M&A deal?
Sets the stage — you’re establishing that these aren’t just “standard boilerplate,” but real tools for protecting the buyer’s investment. It also shows that you get why buyers insist on them.
️ 2. How long and how broad should a typical non-compete be in IT services M&A?
Matt can share “market standard” ranges for duration (1–3 years? 5 years?) and scope (regional vs. national vs. global). It’s a super practical question that your audience will care about — they’re probably Googling it right now!
️ 3. What’s the difference between a non-compete and a non-solicit clause?
Many sellers (and even some buyers) confuse the two. This question lets Matt explain how they overlap and where they differ — adding clarity for your listeners.
️ 4. Are non-competes really enforceable? Or do some states or countries treat them as worthless?
There’s a lot of confusion (and myth!) around whether these are even enforceable. It’s a chance to cut through the noise and talk about how jurisdiction and real-world enforcement actually play out in deals.
️ 5. What’s the risk of agreeing to a non-compete that’s too broad?
Sellers need to know that signing an overly broad non-compete can kill their ability to start a new business down the road. This question lets Matt highlight the hidden risks and why careful negotiation matters.
️ 6. How can sellers negotiate a more balanced non-compete clause?
This makes it practical — Matt can share tactics or language that can help sellers carve out reasonable carve-outs, narrow the scope, or tie the clause to actual buyer concerns (not just blanket restrictions).
️ 7. What’s one of the biggest mistakes you see sellers make when reviewing these clauses?
A “closing” question that lets Matt share a cautionary tale or real-life example — which always resonates with listeners and makes the advice sticky.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.
EPISODE TRANSCRIPT:
00:00 | MattHello, and welcome to this week’s episode of the Shoot the Moon podcast, brought to you by Revenue Rocket. For those who may be new, Revenue Rocket is the world’s premier M&A and growth-strategy advisor for tech-enabled services companies worldwide. I’m here with my partner in crime, Ryan Barnett. Our fearless leader, Mike, is out again today but looks forward to being back next week. Ryan, how are you doing?
00:44 | RyanHey, Matt—I’m doing great, and thanks for joining today. If you’re listening to this podcast, we focus on practical issues in mergers and acquisitions for IT services companies. So if you’re an MSP, CSP, application developer—anyone in tech services—trying to understand today’s market, Shoot the Moon is for you.
Today we’re talking about something a little long-tail but important: non-compete and non-solicitation clauses that show up throughout legal agreements in the M&A process. You can see them as early as letters of intent, sometimes even referenced in NDAs. Matt, get us going: what’s the purpose of a non-compete clause in an M&A deal?
02:00 | RyanMatt, you might be on mute?
02:07 | MattOh—thank you for the edit, Maddie. Yeah, great question. Non-competes and non-solicitations are critical parts of the legal agreements between buyers and sellers. From a buyer’s perspective, they protect both the business being acquired and the buyer’s existing business. They help ensure a seller doesn’t use knowledge or past relationships to compete in like services. In practice, they set the framework for protecting customers, employees, and contracts—the big three. There’s what’s “market” (standard) and what’s not; sometimes parties try to overreach and “land-grab” too much protection through these clauses.
04:07 | RyanThat’s a great intro, and it leads to my next question. With legal agreements, I think in terms of negotiation points. For a non-compete, there’s usually a duration component, some geographic scope, and definitions that narrow the focus. What’s market-standard for durations and scope?
04:40 | MattAn important distinction: are you selling out or selling in? Selling out means you sell the business and move on after a short transition. Selling in means you’ll be part of the business going forward—often as a shareholder.
In a sell-out, you’ll see non-compete/non-solicit durations as short as one year or as long as five. The market “bell curve” is around three years. If you’re selling in—especially becoming a shareholder—your shareholder agreement will also include these clauses, and five years is often typical in that context.
06:33 | RyanOn scope: if I run a managed service provider today and want to open a karate studio, that’s probably fine. But if I want to start, say, an AI automation practice, do non-competes typically define what you can or can’t do? How specific do they get?
07:13 | MattThey should be specific, Ryan. Overly broad non-competes are a problem. Specificity can include services offered, technologies, vendor/channel relationships, and geography. For example, for an MSP, it’s reasonable to specify CSP/cloud resale, procurement of hardware, managed services, etc.
If a seller wants to stay in tech but move into, say, ERP integration for a different customer segment (upper-midmarket/enterprise), with different tech and services, that can be truly non-competitive. That’s why the definitions matter: a good agreement protects the buyer without blocking unrelated pursuits.
09:48 | RyanGreat nuances. Quick note—we’re not lawyers, and we’re not pretending to be. These are clauses we see often, and it’s a practical question we get: Are non-competes actually enforceable? States like California, Texas, and Minnesota treat them differently. In general, how enforceable are they, and what recourse does a buyer have if there’s a violation?
10:54 | MattEnforceability is legal-jurisdiction and language-specific—work with your attorney. Generally, any party can bring a matter to court; injunctions are possible. If harm can be clearly demonstrated, agreements typically outline remedies, penalties, or other recourse. The key is balanced drafting: adequate, fair protection—not overly broad—and clarity about what triggers enforcement or payment.
12:52 | RyanYou’ve been saying “non-compete” and “non-solicitation” together. What’s the difference?
13:25 | MattSimply: non-compete = don’t compete for customers. Non-solicit = don’t solicit employees (and often don’t solicit customers directly). Both are vital. In tech-enabled services, talent is like gold—people businesses rely on key employees. Buyers need protection against a seller poaching staff and, of course, against chasing customers.
14:32 | RyanSo, non-compete covers the business as a whole; non-solicit says don’t poach employees or customers. Similar, but handled in separate clauses.
14:56 | MattRight. And we’ve seen this get real when it involves other shareholders. Not just founders—minority shareholders often sign their own non-compete/non-solicit. Sometimes those individuals later pursue opportunities using their networks. So think in the context of everyone bound by these clauses, not just the main seller.
16:13 | RyanWe’ve also seen NDAs from private equity firms that own many subsidiaries. Any advice for a seller when a sophisticated buyer tries to strike non-solicit or non-compete language early?
17:20 | MattWe have seen that. It often comes up early, during opportunity assessment. Some NDAs reference non-compete/non-solicit concepts to protect against misuse of information (employee lists, customer lists). Sellers want assurance that shared info won’t be used competitively if a deal doesn’t move forward. If a buyer tries to strike protections, come back to “what’s market” and what’s appropriate at each stage (NDA vs. definitive agreements).
19:02 | RyanWe’ve recently come across deals with explicit cash consideration for a non-compete. Why would an LOI or final structure include that?
19:26 | MattA few reasons. Sometimes it’s hard to cleanly delineate scope—think AI, where the landscape changes weekly. A buyer might ask for broader-than-market coverage because they can’t precisely specify. That’s tough for a seller to accept—unless there’s monetary consideration.
More commonly, consideration ties to employment agreements. If, as an employee of the post-close company, you’re asked to sign a more restrictive non-compete than the deal docs, it’s fair to seek additional compensation tied to that restriction.
21:50 | RyanCommon mistakes sellers make when reviewing non-compete clauses?
21:59 | MattSigning something too broad, too long, or too restrictive because “I’m leaving the space anyway.” Plans change. Do what’s market, and work with your lawyer—even if you don’t expect to return—because opportunities can arise during the non-compete period.
23:17 | RyanFounders get antsy and want to get back to work—often in familiar areas. Last question: what advice do you give someone on a two-year non-compete?
23:36 | MattFollow it. Don’t break it. It’s a slippery slope to rationalize: “It’s not exactly the same service,” “They like me better,” etc. There’s rarely justification if you’re crossing the line. Understand the boundaries, live within them, and don’t toe the edge.
24:34 | RyanI thought you were going to say, “Go play more golf.”
24:37 | MattSometimes! And with June in Minnesota upon us, golf is definitely on the horizon.
24:52 | RyanI appreciate the discussion. Non-competes aren’t just boilerplate—go past the template and understand what you’re signing. If you’re a seller, you’ll try to shorten duration; if you’re a buyer, you’ll try to lengthen it. Enforceability varies by jurisdiction, and explicit consideration can strengthen the clause and set expectations. The goal isn’t to be punitive; it’s a negotiation point that deserves real discussion. Matt, any closing thoughts? Take us home.
26:08 | MattGreat topic—and an important one. There’s nuance here. Work with an experienced M&A attorney; they’ll help you understand what’s market and what’s not. Be open about your situation and future plans. A non-compete/non-solicit shouldn’t be a deal-breaker—if it is, step back and reassess the overall opportunity. With that, we’ll tie a ribbon on this week’s Shoot the Moon podcast. Hope you enjoyed it—come back next week!