During the LOI-to-close phase, the buyer is demanding that our leadership team members sign restrictive new employment and non-compete agreements as a condition of closing. How do we manage these negotiations so our key players do not feel coerced or walk away, ruining the deal?

Question

Tyler Smith · Accepted Answer

Buyers want to ensure that the leadership team responsible for the company's success will stay to protect and grow the asset post-closing. However, spring loading restrictive new employment agreements, non-competes, and non-solicits on your key managers late in the process can create resentment, anxiety, and operational paralysis.

To handle this, you must run a parallel, transparent process with your leadership team using your EOS® framework. First, identify who on your Accountability Chart is truly critical to the transition. Address this early rather than waiting for the buyer to drop contracts on their desks a week before closing.

Work with your transaction advisors to establish a clear guidelines package for the buyer. Ensure the terms offered to your team are market-competitive, including reasonable base salaries, performance bonuses, and potential rollover or equity incentives. If the buyer is asking for long non-competes, ensure they are paired with appropriate severance protection.

Bring your key leaders together and use the IDS® process to handle their concerns openly. Explain how the transition aligns with the long-term vision in the V/TO®. If you have implemented a transaction bonus or retention pool, connect these new employment agreements to those financial payouts. By acting as an advocate for your team while managing the buyer's requirements, you protect your people, preserve the health of your culture, and ensure a smooth path to closing.