M&A Series Part 6: Noncompetition provisions

Top 10 negotiated points in an bank transaction: Noncompetition provisions

Editor’s note: This month, BankBeat takes a magnifying glass to the merger and acquisition activity underway in the community banking industry. Anton J Moch and Erik J. Didrikson, attorneys working in the community banking group of Winthrop & Weinstine P.A., Minneapolis, have created a 10-part series for BankBeat, to unpack the considerations bankers must take into account when negotiating a bank deal. Previously in this series: purchase pricepayment termsthe financial condition of the bank, post-closing liability and earnest money and break-up fees. Here is the sixth installment.

Day 6. Noncompetition provisions. Day six’s theme of post-closing competitive protections does not fit snugly with any other provisions (which is why it is often in its own article in a purchase agreement), but it is nonetheless a very important consideration in any transaction. A non-competition provision will help a buyer protect its investment, particularly when a seller is only selling a portion of their operations and will continue operating following the closing.

The scope of who signs a non-compete is often hotly contested. Some buyers may want key board members and management to sign non-compete agreements as a condition of the deal or closing. This demand can result in a heated negotiations, especially where those individuals are not currently subject to such restrictions.

On the flip side, in the case where a holding company is selling a bank that is the only, or the largest asset, of the holding company, a non-compete may not be controversial. Parties will most often discuss the duration, geographic scope, and conduct regulated by the non-compete.

 

Anton J Moch
Erik J. Didrikson

Anton Moch and Erik Didrikson are members of the Winthrop & Weinstine, P.A., community banking group, and are some of the most active and experienced bank transaction legal advisors in the nation. Since 2014, Winthrop has served as chief legal counsel to parties completing the purchase, sale or merger of over 30 banks, bank holding companies and bank branches. Winthrop’s dedicated team of transaction attorneys is annually recognized as tier-one legal advisors to banks on bank transactions as well as corporate governance issues, capital issues, regulatory issues and a wide range of senior management legal issues. Contact Tony at [email protected] or 612-604-6671, or Erik at [email protected] or 612-604-6536.

Attend Anton’s upcoming presentation titled, “Soft” Factors to Consider When Selecting an Acquisition Candidateon Mon., Oct. 1 at the Bank Holding Company Association Fall Seminar, “Buy, Sell or Hold: More Strategies for Success,” in Minneapolis. Winthrop & Weinstine, P.A., is also proud to be a Diamond Level Sponsor at this event. To learn more or to register, visit theBHCA.org.