For the buyer of a small, 10-15 member consulting firm, the value lies in existing customer contracts, goodwill generated by the horizontal or vertical integration the acquisition represents, and in some cases- most importantly- in the non-compete agreements signed by key employees or management not retained with the firm after the sale.

Non-compete agreements are designed to prevent competition which can lead to damaging consequences if the acquirer were to lose key customer(s) in the process. Valuing the non-compete is done using diligent analysis of each of the following:

1. market share of the target firm, outlook for its operations over the next 1 year at minimum and last 2 years of cash flow & quality of earnings analysis
2. any recent or pending liabilities of the target firm including legal fees & settlement payments
3. estimated loss of operating cash flows, profits, etc resulting from the competition
4. discounted value of the profits lost
5. loss of customer references which is a top prize for most consulting firms
6. short and long-term implications of loss of market share to a key competitor that chooses to employ the former employees of the target firm

The probable damages listed above that competition would cause, combined with the likelihood of competition from each key employee, and the time duration for which the company will remain vulnerable can be used to create the noncompete agreement itself, and to determine the monetary distributions under the agreement.