Goodreturns has news that restraints of trade, common in professional services, are often not enforceable. The main problems appear to be with how specific they are, and the scope. The trick is to be very clear, but also to be as limited in scope as you can. Put it the other way, your restraint of trade is unlikely to be enforceable if you are vague, and seek to prevent the adviser from ever contacting a client anywhere.
So far, so normal. But this has implications for business operations and value when sold. Imagine a business with 20,000 clients, handling a broad range of investments, Kiwisaver, and insurance advice services.
In CorporateCo the business is organised so that there is a high level of brand presence, a great website, good central records of clients, nice newsletters, a good programme of covering advisers so that a client is a client of the business, not the individual adviser who gave the advice.
In CollegiateCo the business is a small core of central services and advisers pretty much run their own groups of clients, their own name dominates the corporate brand, correspondence is primarily driven by each adviser and 'their' administrator.
Restraints of trade look very important in the second case, and less so in the first. When trying to sell these businesses CorporateCo looks more valuable - everything else being equal.
The implications for takeovers is different. You very often don't get to decide which kind of business you buy. Often those businesses for sale are not as well organised as those buying - when you think about it, that's logical - so assume you buy something more like 'CollegiateCo' - what do you do? You can work hard to retain the advisers as long as possible. You can put in a reasonable restraint. But more than those, you must add the things that were missing in the first place: adding so much value that even if an adviser leaves and tries to take lots of clients from you, they find that hard. It also helps to be a little philosophical about things, some clients will never stay.