June 8, 2022
What’s Market Practice When it Comes to #MeToo Reps?
Bloomberg Law’s Grace Maral Burnett & Emily Roleau recently published their analysis of market practice on reps & warranties addressing sexual harassment & sexual misconduct. The analysis is based on a review of more than 300 billion-dollar M&A agreements signed between January 2018 and March 2022 containing #MeToo reps, and identifies both the most common approaches and new and emerging approaches to these provisions. Here’s an excerpt:
The results of our review reflect some of the same basic characteristics we first observed in 2019, shortly after alert deal lawyers first began drafting these provisions. For example, the vast majority (87%) of the #MeToo reps reviewed were made only by the target or seller (not mutually with the acquirer); nearly three-quarters (72%) contained some form of knowledge qualifier (often as a defined term with a capital “K” for Knowledge); 83% contained a lookback period (typically 3 to 5 years); and 66% contained a limitation as to the level of employees involved in, or subject to, the allegations or claims of sexual harassment or misconduct (most commonly “directors, officers, or employees at the level of Vice President or above”).
Of the 311 agreements reviewed, 39 (13%) contained mutual #MeToo representations made by both the target and/or seller and the acquirer. Surprisingly, only 27 of the 311 agreements reviewed (9%) contained a reference to disclosures (most typically such references are framed as exceptions to the representation being made, e.g., “Except as disclosed in Schedule [X] . . .”).
The analysis lays out other provisions of these representations and warranties, including lookback provisions, knowledge and materiality qualifiers, and the type of events covered (e.g., “no allegations,” “no settlement agreements”, etc.). It also looks at some emerging trends in these reps and warranties, including the inclusion of language to the effect that the representing party “has investigated” any known allegations of sexual harassment without an accompanying rep that no allegations have occurred.
– John Jenkins