In Bloomberg Law Article, Akin Gump Lawyers Discuss #MeToo Risks in M&A Transactions

Bloomberg Law has published the article “INSIGHT: #NotMe—Sexual Harassment Risk Assessment in Mergers & Acquisitions,” written by Akin Gump corporate partner Kerry Berchem, labor and employment partner Lauren Leyden and corporate associate Elizabeth Atkins. The article looks at some examples of #MeToo representations and offers a warning to companies that ignore the risks associated with them.

The authors begin by advising that, “in the #MeToo era, even informal allegations of sexual misconduct can diminish a company’s brand and cause real financial impact.” Social due diligence, they warn, must be conducted in order to gauge the risk of any future allegations. This would cover “everything from employee reviews to social media and should include a sober assessment of whether a company’s human resources department and policies allow for a culture permissive of sexual harassment.”

Berchem, Leyden and Atkins discuss #MeToo reps, which they describe as “a representation that no credible accusations of sexual harassment had been levied.” They then provide some examples of how these would be written.

The article concludes by advising that #MeToo reps “should provide acquirers with a remedy against breach by targets of their moral and contractual obligations to guard against and respond appropriately to claims of sexual harassment.” The target, they add, “should indemnify, protect and hold harmless the buyer for any breach of a #MeToo representation, just as it would for other negotiated representations and warranties.” By ignoring the risks involved, a company does so at its own peril, as well as to that of its employees, boards of directors and stockholders.

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