The #MeToo Movement Migrates to M&A Boilerplate

By Windemuth, Anna | The Yale Law Journal, November 2019 | Go to article overview

The #MeToo Movement Migrates to M&A Boilerplate


Windemuth, Anna, The Yale Law Journal


NOTE CONTENTS

INTRODUCTION                                                        491

  I. THE #METOO CLAUSE'S EMERGENCE IN M&A TRANSACTIONS              495
     A. Navigating M&A Agreements                                   496
     B. The #MeToo Clause's Origins                                 499
     C. Content Analysis of Thirty-Nine Clauses                     503
        1. Knowledge Qualification                                  504
        2. Reference to Disclosure Schedule                         508
        3. Specific Time Span                                       509
        4. Allegations of Sexual Harassment or Misconduct           511
        5. Professional-Capacity Limitation                         513
        6. Current-Employee Limitation                              514
        7. Hierarchical or Role-Based Limitation                    515
        8. Written-Allegation Limitation                            516
        9. Reference to Settlements                                 517
 II. A NEW SOCIOCULTURAL IMPACT ON M&A                              518
     A. The #MeToo Clause: A Unique Form of "Reactive Growth"       518
        1. Reactive Growth in M&A                                   519
        2. The #MeToo Clause Is Here to Stay                        521
     B. The Benefits of the #MeToo Clause                           521
        1. Driving Conversations Among Lawyers, Executives, and HR  522
           Personnel
        2. Deepening Inquiries into Sexual-Harassment Policies      523
           During Due Diligence
        3. Legal Recognition of Harassment Allegations              524
        4. Incentivizing Companies to Prevent Sexual Harassment     525
     C. The Drawbacks of the #MeToo Clause                          526
III. THE #METOO CLAUSE GOING FORWARD                                527
     A. Reimagining the #MeToo Clause to Focus on Reporting         528
        Infrastructure
     B. Targeting Settlement Agreements                             530
     C. Improving Sexual-Harassment Reporting Infrastructure        531
     D. Effective Communication During Due Diligence                534
CONCLUSION                                                          535
APPENDIX A: METHODOLOGY                                             535
     1. Quantitative Method                                         535
     2. Qualitative Method                                          537
APPENDIX B: #METOO PROVISIONS IN PUBLIC M&A DEALS                   539

INTRODUCTION

The #MeToo movement has left its mark on corporate lawyering, but not through a slew of high-profile firings. Rather, the risk-averse field of corporate law has integrated #MeToo into one of its most significant tools: the mergers and acquisitions (M&A) agreement. Dubbed the "Weinstein clause" on Wall Street, this new provision began appearing in M&A contracts in early 2018, a few months after sexual-assault allegations against film producer Harvey Weinstein surfaced in the popular media. The clause exists in various forms, but generally represents that, to a target company's knowledge, senior employees have not been subject to allegations of sexual harassment within a particular time span.

Reporters and pundits expressed surprise that a clause reflecting awareness of workplace sexual harassment would surface in the "male-dominated world of M&A advisory," (1) the "male-dominated world of finance," (2) or the "testosterone-infused Wall Street mergers and acquisitions market." (3) Such surprise, this Note argues, is misplaced. The clause does not stem from a desire for progressive reform, but is rather best understood as a tactical industry response to reduced tolerance for misconduct.

The Weinstein Company's demise illustrates the economic power of such reduced tolerance. Before the New York Times first reported on allegations against Weinstein in October of 2017, (4) the Weinstein Company's board estimated that its television entity alone was worth around $650 million. …

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