Non-solicitation Agreement
A narrower restriction than a non-compete — specifically prohibiting the seller from actively soliciting the sold business's customers or employees for a defined period, even if a full non-compete isn't included or isn't enforceable. Non-solicitation agreements are more broadly enforceable than non-competes in states like California, where non-competes are largely banned but non-solicits are permitted in some circumstances. Standard M&A transactions include both a non-compete and a non-solicit covering customers and employees.
Full Definition
A non-solicitation agreement is a contractual provision that restricts a party from soliciting the customers, clients, or employees of another party — typically for a specified period and within a specified geographic area. In M&A transactions, non-solicitation obligations appear in two primary contexts: seller non-solicitation of customers/employees post-close (protecting the buyer's acquisition from seller cannibalization), and buyer non-solicitation of seller employees during the due diligence process (preventing "talent poaching" before a deal closes).
Seller non-solicitation post-close is a standard component of SMB acquisition agreements. When a seller divests a business, the buyer is acquiring the goodwill — including customer relationships — as a core asset. A seller who immediately approaches those customers or recruits key employees after closing would be destroying the very goodwill for which the buyer paid. Non-solicitation provisions protect against this scenario without necessarily restricting the seller's ability to compete broadly (which requires a separate non-compete provision).
Non-solicitation of employees is particularly significant in service businesses where talent is the primary value driver. A consulting firm, staffing company, or professional services business where the seller walks out with the key employees is a business that has been effectively gutted. Non-solicitation of employees prevents the seller from actively recruiting away the staff that makes the business valuable — though it typically doesn't prevent employees from leaving voluntarily.
The distinction between non-compete and non-solicitation is important. A non-compete prevents the seller from engaging in a competitive business at all; a non-solicitation only prevents targeted recruitment of customers or employees. Non-competes face stricter legal scrutiny and enforceability challenges in many jurisdictions; non-solicitation provisions are generally easier to enforce because they're more narrowly targeted.
Non-solicitation provisions must be reasonable in scope and duration to be enforceable. Most courts will enforce non-solicitation of customers and employees for 1-3 years. Provisions longer than 3-5 years, or those extending beyond the seller's direct sphere of influence, face enforceability challenges. Geographic restrictions should be tied to where the seller actually operated and where the business's customers are located.
Seller vs. Buyer Perspective
Non-solicitation of customers post-close is a standard concession in any business sale — agree to it as a matter of course for a reasonable period (typically 2-3 years). Resisting standard non-solicitation creates friction with buyers and signals potential intent to compete. If you're starting a new venture that might involve the same customer base, disclose that upfront and negotiate the non-solicitation scope accordingly.
Employee non-solicitation cuts both ways. Buyers may also ask you to commit that you won't recruit the business's employees to your next venture for a defined period. Agree to this in principle — it's reasonable — but negotiate what constitutes "solicitation." Responding to an employee who reaches out to you proactively is different from actively recruiting. Include carve-outs for this scenario in the agreement.
For non-solicitation provisions that protect you (e.g., restrictions on the buyer recruiting your remaining employees or business contacts during a transition period), negotiate these reciprocally. Non-solicitation can and should run in both directions if appropriate.
Non-solicitation provisions are essential protections but incomplete substitutes for non-compete agreements. In any business where the seller's personal relationships with customers are the core value, a non-solicitation (which only prevents active recruiting) is weaker protection than a non-compete (which prevents the seller from competing at all). Evaluate which protection you actually need based on the nature of the business and the seller's role.
During due diligence, avoid any actions that could constitute solicitation of the target's employees — this protects against claims that the buyer was poaching talent before closing. Get a reciprocal non-solicitation from the seller in the LOI covering the period between signing and closing.
Enforce non-solicitation provisions promptly if violations occur. Courts are more likely to issue injunctive relief quickly (before significant damage occurs) than to award large damages later. If you have evidence a seller is soliciting your customers post-close, consult litigation counsel immediately.
Real-World Example
A buyer acquires a staffing agency for $4.5M. The seller agrees to a 2-year non-solicitation of the agency's clients and placed employees. Six months post-close, the buyer discovers the seller has formed a new staffing company and is actively calling former clients. The buyer's attorney files for injunctive relief, presenting email evidence of the seller contacting five of the agency's top clients. The court issues a preliminary injunction, ordering the seller to cease all contact with former clients while litigation proceeds. The buyer ultimately recovers $350K in damages representing lost business plus legal fees.
Why It Matters & Common Pitfalls
- !Overbroad scope triggering unenforceability. Non-solicitation provisions covering parties the seller never dealt with, or lasting 5+ years, risk being voided entirely rather than narrowed by courts. Keep them reasonable.
- !No distinction between solicitation and voluntary departure. Non-solicitation provisions restrict active recruitment, not voluntary employee decisions to leave. Buyers who try to hold sellers liable for employees who leave independently are overreaching.
- !Incomplete customer definition. 'Customers' should be defined specifically: current customers, prospects the seller was actively working, or all parties the seller has met? Ambiguous definitions create enforcement disputes.
- !Failure to define communication channels. Non-solicitation provisions that don't specify that LinkedIn messages, personal email, and phone calls all constitute solicitation may fail to cover obvious evasion tactics.
Frequently Asked Questions
What is a non-solicitation agreement in M&A?↓
What's the difference between non-compete and non-solicit?↓
Related Terms
Non-compete Agreement
A contract provision restricting the seller (and often key employees) from competing with the acquired business after closing — defined by geography, time period, and scope of competing activity.
Covenant Not to Compete
A contractual restriction in the purchase agreement preventing the seller from competing with the sold business for a defined period, geography, and scope — standard in M&A and generally enforceable when the buyer is paying for goodwill.
Key-person Risk
The dependency of a business on specific individuals — typically the owner, but also key salespeople, technical leads, or operators — whose departure would materially damage the business's value or operations.
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Disclaimer: The information provided on this page is for educational and informational purposes only. It should not be considered financial, legal, or investment advice. Business valuations depend on many factors specific to each situation. Always consult with qualified professionals — including business brokers, CPAs, and M&A attorneys — before making acquisition or sale decisions. LegacyVector is not a licensed broker, financial advisor, or attorney. Data shown may be based on limited samples and may not reflect current market conditions.
LegacyVector Research Team
Reviewed by M&A professionals · Updated April 2026