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Failure to value goodwill invalidates nonsolicitation agreement


SKU: ADVnd162. Category: .


Abstract: The value of a private business is instrumental in many legal scenarios, including property settlements in divorce cases and damages calculations in business litigation. But valuation also may be critical in less obvious matters, like the validity of nonsolicitation agreements. This article looks at a recent ruling in Monarch Healthcare Inc. v. Orr that illustrates the importance of hiring an objective valuation professional to allocate a portion of a business’s purchase price to goodwill. The case shows that failure to do so could invalidate noncompetes and nonsolicitation clauses, depending on state law and the type of business involved. Monarch Healthcare Inc. v. Orr, No. G050463, Jan. 20, 2016 (Cal. App.)

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