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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, mergers 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 LLP.
Read more articles at Fisher & Phillips' Non-Compete and Trade Secrets blog.
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