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by Michael R. Greco
February 2013 was an active month in the world of
non-competes and trade secrets, and if we read the tea leaves, it looks like
things are only going to get busier. Before I recap some of February's
highlights and direct you to some of the best resources out there on the web,
let's briefly discuss one reason I think non-compete issues are likely to be
pushed to the forefront over the coming months and year -- Warren Buffet.
Warren Buffet? That's right, Warren Buffet, and people like him.
It was widely
reported in February that Warren Buffet's Berkshire Hathaway teamed up
with 3G Capital Management to acquire H.J. Heinz. Buffett said Berkshire
is contributing "something between" $12 and $13 billion to the deal.
Of greater interest, however, Buffet said that Berkshire is sitting on
another $47 billion in cash and he joked, "I'm ready for another elephant.
Please, if you see any walking by, just call me." What does this
have to do with non-competes and trade secrets? A lot. Over the
past few years with all of the economic and political uncertainty, a lot of
private equity has built up and remained on the sidelines, but like Warren
Buffet's $47 billion, that cash is sitting there waiting for the right elephant
to walk by. But private equity investors aren't foolish. After
investment committees decide to pursue a target acquisition candidate and deal
professionals succesfully submit an offer to the seller, it is time to get the
lawyers involed in the due diligence phase. Due diligence includes more than
just validating management's stated operational and financial figures. Due
diligence is the point at which it is critical to determine who has a
non-compete and who does not. Just as important, the agreements need to
be examined to ensure they are appropriately tailored to protect the target
company's legitimate interests, and to ensure they will remain enforceable
after the acquisition. If key employees lack restrictive covenants, due
diligence is the time to address the issues. Then, of course, someday, if
and/or when employees leave, litigation becomes a distinct possibility. In short,
and acquisitions precipitate non-compete and trade secret contracting and
litigation. Without a doubt, the month of February told us this
issue is going to be hot well into the 2010's.
What else did we learn in February? Let's look
around the web.
Finally, for those of you who have taken my advice to pay
a visit to the blogs written by John Marsh, Russell Beck and Kenneth Vanko, I'm
sure you share my opinion they are top notch. If you enjoy them as much
as I do, consider listening to one of their podcasts.
Michael R. Greco is a partner in the Employee
Defection & Trade Secrets Practice Group at Fisher & Phillips
Read more articles at
Fisher & Phillips' Non-Compete and Trade Secrets blog.
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