A divestiture letter forced a fight over three signatures

The situation

The letter arrived attached to an email with no covering note beyond 'see attached, let's discuss.' It was a letter of intent, four pages long, from a company several times the size of the division it wanted to buy, and clause eleven was the one that made Selam call our office the same afternoon. It required, as a condition of closing, that Dawit and Vesna, the two principals who had built and run the division for years, each sign a personal non-compete agreement lasting well beyond what the seller had ever discussed internally.

Selam worked for the corporate parent, a company with several operating divisions across the region, and this particular division had grown into a competitor worth acquiring in its own right, largely on the strength of Dawit and Vesna's client relationships and technical reputation. The parent had decided to divest the division as part of a broader restructuring, not because the division was struggling but because it no longer fit the parent's strategic focus. Dawit was a registered nurse by training who had moved into healthcare-adjacent business operations, and Vesna, a mortgage broker before she joined the division, had brought financial discipline to a unit that badly needed it. Between them they were the reason the buyer wanted the deal at all.

That was exactly the problem. A buyer paying a premium for a division built around two people has an obvious incentive to make sure those two people cannot simply leave, start a competing operation nearby, and take the client relationships with them. The buyer's opening non-compete terms reflected that fear directly: a long restricted period, a broad description of competing activity, and a geographic scope that went well beyond the region the division actually served.

Selam's mandate was to get the division sold at the price the parent had already agreed to in principle, without giving away terms that would make it impossible for Dawit and Vesna to work again in their own field, and without letting the negotiation stall long enough to put the whole transaction at risk. Complicating things further, Selam had no direct authority over Dawit or Vesna; her job was to represent the parent's interests in the sale, while Dawit and Vesna would need their own advice on covenants that would bind them personally for years after the corporate deal itself was done and the parent had moved on to other priorities entirely.

The problem

The imbalance in this negotiation was not subtle, and the buyer did not pretend otherwise. It was a company with resources the seller's division could not match, a legal team that could out-draft and out-wait almost any counterparty, and, most importantly, no urgency to close by any particular date. The parent, by contrast, had already told its board and its other divisions that this restructuring was underway, and a collapsed sale would have been an awkward result to explain.

The buyer's counsel made the leverage explicit early in the negotiation, noting more than once that the deal terms on offer were generous given the division's size and that the buyer had other acquisition targets it could pursue instead. That was not an idle comment. The sector had a limited number of comparable divisions available for sale, but not zero, and everyone at the table understood that walking away cost the buyer relatively little while it cost the seller a great deal.

The non-compete demand sat inside that dynamic. A restrictive covenant against a departing principal is enforceable in Ontario only if it is reasonable in scope, duration, and geography relative to what it is actually protecting, and courts have been willing to strike down covenants that overreach rather than narrow them to a reasonable version. The buyer's initial draft was, in our assessment, vulnerable to exactly that kind of challenge if it were ever tested, but a legally vulnerable clause still does real work if a buyer is willing to enforce it and a departing employee cannot afford the fight to have it narrowed.

Dawit and Vesna were not employees the parent could simply direct. Their cooperation was a practical necessity for the sale to close cleanly, since the buyer's confidence in the deal rested on both of them actually being bound by whatever agreement resulted, and any hint that they would resist signing threatened to unravel the price the parent had negotiated on the assumption they would. That gave Dawit and Vesna a form of leverage the corporate structure of the deal did not obviously provide for: the parent needed their signatures as much as the buyer did, and neither of them owed the parent the kind of loyalty an employee bound by ongoing obligations might feel obligated to extend. Recognizing that leverage, and using it deliberately rather than leaving it unspoken, became a central part of how the negotiation was actually won.

What we did

1. Reviewed the buyer's draft non-compete against Ontario's reasonableness standard before responding. We assessed the proposed duration, geographic scope, and definition of competing business against how covenants of that kind are typically tested by a court asked to enforce them, to identify precisely which terms were defensible on their face and which were overreach the buyer would likely concede if pressed on the underlying rationale rather than the wording alone.
2. Separated the corporate transaction from the personal covenants in the negotiation structure. We proposed handling the share or asset purchase agreement and the non-compete agreements as related but formally distinct documents, which let us negotiate Dawit and Vesna's personal terms on their own timeline without holding up progress on the underlying commercial deal, and without letting either negotiation become a hostage to the other's pace.
3. Brought Dawit and Vesna into the negotiation directly rather than negotiating on their behalf from a distance. Because their cooperation was what the buyer actually needed to close, we made sure their concerns about future employability were represented at the table in their own words, which gave the seller's overall position more practical weight than the parent company's lawyers alone could carry on their behalf.
4. Narrowed the geographic scope from national to the region the division actually served. We argued, using the division's own client list and service records as evidence, that a national restriction protected nothing the buyer was actually paying for and would be difficult to defend if ever challenged, and the buyer's counsel eventually agreed to confine the covenant to the territory the division had genuinely built its reputation in.
5. Reduced the restricted period through a graduated structure. Rather than accept a single fixed term at the buyer's preferred length, we negotiated a shorter full restriction followed by a longer period limited only to direct solicitation of named former clients, giving the buyer real protection on its core concern while letting Dawit and Vesna re-enter the broader field considerably sooner than the opening draft allowed.
6. Added a carve-out for unsolicited business. We insisted the covenant not prevent Dawit or Vesna from accepting work from a former client who approached them independently and without solicitation, since a total bar on inbound business is one of the terms most likely to be found unreasonable by a court, and hardest for a buyer to justify as protecting a legitimate interest rather than simply suppressing competition.
7. Tied final signing to the closing conditions rather than to the letter of intent stage. We made clear the non-compete agreements would be executed at closing alongside the purchase agreement, not before, which kept pressure on the buyer to finalize its own commercial terms in good faith rather than treating the covenants as already secured while everything else stayed open for further negotiation on the buyer's schedule.
8. Prepared Dawit and Vesna for the practical reality of signing regardless of outcome. We were candid with both of them from early on that some restriction was very likely unavoidable given the buyer's leverage, so that when the final terms landed short of ideal, the outcome matched the expectation we had set rather than arriving as a shock late in the process.

The outcome

The deal closed, in the $15M to $30M range the division's size supported, on a timeline close to what the parent had originally targeted. The non-compete agreements Dawit and Vesna ultimately signed were meaningfully narrower than the buyer's opening draft: a restricted region matched to where the division actually operated, a shorter full-restriction period followed by the client-solicitation-only phase, and the carve-out for unsolicited business.

It was not, by Selam's own account afterward, the outcome the parent would have chosen if it had held the stronger hand. The buyer's size and its evident willingness to walk away meant the final terms still landed closer to the buyer's opening position than to a neutral middle ground, and Dawit and Vesna both accepted a restricted period longer than either wanted going in. The parent also gave slightly on price late in the process, a concession made in part to keep the non-compete negotiation from becoming the reason the whole deal fell apart.

Vesna, in particular, said afterward that the client-solicitation-only phase mattered more to her than the length of the restriction itself, since it meant she could take on new work in her field almost immediately, provided she was not actively chasing the division's former clients. Dawit reached a similar accommodation, taking a role at a different company outside the restricted region within the first year, something the buyer's original draft would have made impossible for considerably longer.

What the negotiation avoided was the worse version of that same outcome: a non-compete so broad it would have effectively ended Dawit's and Vesna's careers in their own field, agreed to under time pressure with no real pushback. The compromise reached was one both sides could actually live with, which in a negotiation with this much of an imbalance built into it, is a realistic measure of success.

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