The enforceability standard is still developing. Courts have not settled on uniform metrics for what constitutes proportional geography and duration, and the line between permissible transaction protection and impermissible overbreadth remains fact-specific. The FTC continues to scrutinize restrictive covenants even after its nationwide noncompete rule collapsed, and state legislatures are tightening noncompete rules in 2025–2026, which may further constrain judicial tolerance for broad sale-of-business covenants.
Buyers and sellers in M&A transactions should expect heightened scrutiny of restrictive covenants, especially in Delaware and California. Drafters should define restricted business by reference to the company sold, keep geographic and temporal limits proportional to the transaction, and avoid language that extends beyond the purchased assets. For private equity firms and strategic acquirers, this narrowing enforceability standard makes covenant drafting legally sensitive and increases the risk that overly broad restrictions will be struck down or limited by courts.