Wall Street buyers are paying more attention to the threats sexual misconduct scandals can pose to investments, Bloomberg reports. In what’s known as “the Weinstein clause,” (referencing the disgraced Hollywood producer accused of a long history of sexual assault and harassment), advisers are adding language to mergers that require one to legally vouch for the positive behavior of a company’s leadership. In some cases, merger agreements say buyers have the right to receive refunds if, after the deal, revelations of misbehavior damage business.
“Social due diligence is becoming more and more important and, particularly for founder-centric businesses, money is being put aside to address #MeToo issues,” Gregory Bedrosian, chief executive officer of the investment bank Drake Star Partners, told Bloomberg.
Bedrosian said that over the past six months, buyers have begun asking sellers to make legal representations about the behavior of their leadership. It’s become known as “the #MeToo rep,” he said. Sellers must state that nobody has accused any member of their management or leadership of sexual misconduct. Bloomberg reports at least seven deals made this year—involving public companies in the entertainment, hospitality, and real estate sectors—include such a clause.
More than 400 high-profile executives and employees have been affected by the #MeToo movement in the last year and a half, according to data from the consultant firm Temin & Co. Its study states that while accusation rates have been slowing, the percentage of those getting fired has increased. Such disruption in company leadership can affect business, and Wall Street knows it.
