Non-compete clause

A non-compete clause (clause de non-concurrence) is a contractual provision whereby the seller of a business undertakes not to engage, directly or indirectly, in competing activities within a defined geographic area, sector and time period after closing. It protects the acquirer's investment: the buyer pays for goodwill including customer relationships and commercial know-how — assets that would be immediately threatened if the seller could recreate a competing business. Its validity requires proportionality (duration, territory, scope) and, in France, financial compensation for employees subject to non-compete obligations.

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Example: in a CHF 12.0 million sale of a Swiss financial advisory firm, the SPA includes a 3-year non-compete covering Switzerland, France and Belgium in the business valuation and M&A advisory sector. A compensatory payment of CHF 600,000 (5% of price) is made to the seller — economically justified by the projected advisory fees the seller would have earned from competing clients during the restriction period.

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Hectelion advises on non-compete clause calibration to protect acquired value while remaining within the bounds of legal enforceability in France and Switzerland.