08-14-2018
It is not just Wall Street. Many companies are including new clauses in their merger agreements. Given the significant financial fallout from allegations of sexual harassment, many merger agreements now include guarantees that upper-level management has not been behaving inappropriately. These added clauses reflect the fear across industries of deep financial losses in the current environment when key players face sexual harassment allegations.Some agreements even go further than just asking for a guarantee by giving buyers the right to get back some of the money paid if those sexual harassment allegations arise later. One investment banker disclosed that sellers have funds (as much as 10 percent of the deal) that are put into escrow that buyers may claim if sexual harassment allegations come to light. The fear is so strong that some mergers have asked about allegations going way beyond any applicable statute of limitations because of the tremendous impact such allegations have had.
These guarantees, also called the #MeToo rep,” are reported to have only come into existence in the last six months. Bloomberg has reported that “at least seven deals” this year with public companies have included these types of representations.