Non-competes and key-employee agreements on a plant sale

Which seats on a plant file actually need paper?

The owner who quotes. The second-chair estimator if one exists. The salesperson who can move the whale. The quality manager whose name is on customer portals. The maintenance lead who is the only person who can restart a press. Those are key seats. A controller who will stay for a stay bonus may need a retention letter, not a five-year industry ban.

Deloitte and The Manufacturing Institute estimated 3.8 million workers needed in 2024–2033 with 1.9 million potentially unfilled (Source: Deloitte/MI, 2024). That labor math is why buyers pay for stay packages and why sellers who have no deputy take a discount. It is not a reason to force a receptionist to sign a covenant.

BLS OEWS May 2025 median wages — machinist $58,750, welder $53,750 (Source: BLS) — belong in the replacement-cost memo and in any retention math. Units of rollover do not replace a wage.

State law on worker non-competes varies and is moving. Some states restrict them sharply. This page will not invent a nationwide enforceability rule, a duration, or a geography that "always works." Counsel in the closing state writes the covenant that can be defended there.

How should disclosure staging keep key people from hearing too early?

Identify seats in the CIM without names if the floor does not yet know. Paper them when NDA and staged disclosure says names can be used — usually after a real LOI, not after the first plant tour. When to tell employees is the seller timing essay.

Asking the estimator to sign a covenant the week you list the company is how rumors start. Asking nobody to sign anything until the Monday after close is how the book walks. The middle is a stay conversation with the two or three people who already sit in the recast circle.

IBBA Pulse Q1 2026's 83% three-offer fact on deals over $5 million (Source: IBBA) is a process fact. It does not mean you can skip people paper because "someone else will close." Competing buyers still underwrite the same estimator.

How do earn-outs, SBA cash, and size bands change the people chapter?

An earn-out on named-account GP fails if the salesperson leaves and takes the account. Write the stay package beside the metric. A seller non-compete that the owner ignores by "consulting" for a cousin shop is how you fund a competitor with your own wire.

SBA 7(a) still caps at $5 million with a 10% injection (Source: SBA). Individual buyers inside that box are often the new operators. They need the book more than a sponsor with a bench. The loan does not hire a deputy and does not enforce a covenant.

Main Street manufacturing at 2.75x median SDE on about $268k earnings (Source: BizBuySell / Iconic) is an sde-under-1m observation. On that band, owner-dependence is the usual discount. An ebitda-3-10m certified supplier talking a synthesized 6.5x–9.0x aerospace band still needs portal names to stay. Stanford's $16 million / ~6.2x / ~25% median (Source: Stanford GSB) describes search-fund files that almost always require a stay plan. That median is never a job-shop multiple.

What should the LOI say so people paper is not a week-of-close surprise?

Write that the seller will sign a non-compete and non-solicit in a form counsel agrees, with duration and geography to be documented as enforceable in the closing state. Write that named key employees will be offered stay packages before close. Write that the buyer will not contact the floor until the process allows it. Write that transition hours are paid work, not unpaid covenant theater.

Do not print a five-year nationwide ban in a CIM. That sentence can be unenforceable and it scares buyers who have read their own counsel. Do not promise the estimator will stay if you have not asked.

What does an illustrative people-paper file look like when it works?

Illustrative only. A 19-person fab: owner still quotes 70% of jobs, one estimator in training, one salesperson on a 28% account. LOI requires owner covenant, 12-month stay bonus for the estimator, account non-solicit for the salesperson, 90 days of paid training. Buyer is a 7(a) individual inside the $5 million cap (Source: SBA). Ordinary. Collectible if the deputy is real.

A second file: owner says "the shop runs without me," QoE kills that add-back, no deputy, no stay conversations, a form non-compete copied from the internet. Buyers walk or haircut. Labor analysis is how a buyer scores this before they exclusive.

BizBuySell's 223-day 2025 manufacturing median close (Source: BizBuySell) is a planning number. Use part of it to build a second chair, not to hope the covenant will replace one.

Census CBP 2023 counted 284,452 establishments, 68.4% under 20 employees (Source: Census CBP). Most of those shops are owner-quoted. People paper is not a PE custom. It is the deal.

Educational information only. Not legal advice. Employment and deal counsel draft covenants that can be defended in the closing state. Jason Taken is a business broker with HedgeStone Business Advisors. No covenant guarantees the book will stay.

How should a buyer diligence the book without exploding confidentiality?

Ask for a seat map, not a gossip list. Who quotes when the owner is out. Who is named on the hero portals. Who can restart the oldest press. Labor analysis is the buyer essay. Plant-visit protocol still keeps extra people in the car. Do not interview the estimator on the floor in front of the weld cell.

If the seller will not identify seats even under NDA, you are buying a mystery. If the seller wants you to hire the cousin who "helps on Fridays," put that person on a schedule as related-party labor. QoE will find them anyway.

A stay bonus that vests on close and again at six months is more useful than a speech about loyalty. Write what happens if the buyer moves the work to another state. Write what happens if the seller's covenant is breached — escrow, offset, or a specific indemnity — so escrow and indemnity and this chapter point at the same dollars.

What process mistakes turn people paper into a rumor?

Listing the company and then asking the whole office to sign "updated handbooks." Printing draft non-competes on the shared printer. Debating the whale salesperson's bonus in the break room. Letting a competitor in the process meet the estimator. Those are how files leak.

The other mistake is the opposite: no paper, a hope that "they're family," and a Monday after close when the quoter has a new card from a shop two towns over. Family is not a covenant. Census CBP 2023's 284,452 establishments and 68.4% under 20 employees (Source: Census CBP) means most plants are small enough that one departure is a hole.

Fed utilization 76.0% (Source: Fed G.17) and ISM Prices 71.1 (Source: ISM) describe climate. They do not keep an estimator. Combined 7(a)+504 can reach $10 million (Source: SBA); that stack still needs a deputy.

Jason Taken will keep the CIM from treating "great people" as a document. HedgeStone will ask who quotes on a Thursday. If the answer is only the owner, the multiple already knows. Build a second chair or price the paper. Do not do neither and hope a form downloaded at midnight will hold a book. Employee transfer is the benefits and WARN companion. This page is the seats that can move revenue. Use both. A last habit: put the stay-package dollar next to the replacement-wage line in the recast so QoE and the people chapter tell the same story. Hidden stay costs are add-backs that die.

Consideration for a covenant should be explicit. In some states a job offer or a slice of purchase price is how counsel supports enforceability. That is a local-law question, not a blog rule. Do not handshake a $1 covenant and assume it will hold. Do not allocate a huge Class VI number on Form 8594 just to "help" without a CPA in the room.

If the owner plans to keep the building and lease it back, the covenant should say whether they can walk the floor as landlord without quoting work. Landlord access is not a consulting engagement. Write the hat they are wearing. Transition pays for training hours. The covenant pays for absence from the competitive field. Those are different checks.