Wall Street advisers are adding a so-called Weinstein Clause to certain merger agreements to help protect buyers from any past scandals among the selling company's senior executives, according to Bloomberg.
Here are four things to know:
1. The new guarantees are being added to merger agreements in light of the sexual misconduct scandals involving high-profile businessmen, including producer Harvey Weinstein.
2. Gregory Bedrosian, CEO of boutique investment bank Drake Star Partners, told Bloomberg this new type of clause has been included in several agreements he has worked on. In some cases, sellers put as much as 10 percent of the total value of a transaction in escrow that buyers can claim if any social issues arise, according to the report.
3. "Social due diligence is becoming more and more important and, particularly for founder-centric businesses, money is being put aside to address #MeToo issues," Mr. Bedrosian told Bloomberg.
4. Mr. Bedrosian told Bloomberg sellers are also being asked to make legal representations about the behavior of members of their management teams. These clauses, which have popped up over the past six months, are being referred to as "the #MeToo rep," he told Bloomberg.
Access the full Bloomberg article here.
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