August 13, 2018
The clauses—which are becoming more common following the #MeToo scandal—aim to ensure “sexual harassment allegations don’t lead to material damages or post-closing recourse when planning acquisitions.”
Lisa told the publication that given recent events companies need to be prepared to mitigate these types of risks.
"When considering acquisition targets, particularly where management is key to the success of the target business, companies should consider using these clauses, or consider implementing more robust due diligence processes and practices aimed at understanding the culture of the target business and its history of compliance,” she said.
"After the Weinstein situation and other #MeToo events, it is time for companies to get their ducks in a row and make sure that they have policies and procedures in place."
Rima spoke with the publication about the transactional elements of the issue.
The article said that with a Weinstein clause in place, a company must disclose to the buyer any material allegations but explained that ultimately it "comes down to how these clauses are negotiated."
"If you are a seller you are going to want to have a very high materiality threshold so that it is unlikely it will ever be triggered,” Rima said.
"But if you are a bidder, you are always motivated to try and get broader, cleaner representations with less materiality thresholds so that it forces the target to disclose as much as possible."