What is the purpose of a 'non-compete agreement' in a merger or acquisition?

A non-compete agreement in the context of a merger or acquisition is primarily designed to prevent the seller from starting or joining a competing business for a specified period after the sale. This is important for the acquiring company as it aims to protect its investment and market position by ensuring that the seller does not leverage any confidential or sensitive information gained during their tenure to directly compete against the acquirer. By restricting the seller's ability to enter into competition, the acquiring firm can create a more stable environment for the business post-acquisition, allowing them to secure their client base and maintain the proprietary advantages garnered before the merger.

While the other options may play roles in various aspects of M&A, they do not directly relate to the core purpose of a non-compete agreement. Facilitating smoother negotiations, protecting intellectual property, and boosting company morale may be important elements in the broader context of M&A activities, but they do not specifically address the competitive concerns that a non-compete agreement is designed to mitigate.