The #MeToo movement took society by storm in 2017, simultaneously introducing a number of social, cultural and legal concerns that private equity (PE) sponsors have frantically tried to get ahead of ever since. One strategy adopted by PE managers is to incorporate #MeToo-related questions into their diligence reviews of potential target company acquisitions to ensure they do not unexpectedly assume any risks. PE sponsors are also auditing their portfolio companies’ sexual harassment policies and procedures to mitigate any risks during the holding period, as well as address any problems that could harm their future attempts to exit those investments. To explore these issues, the Private Equity Law Report interviewed Katten partners Kimberly T. Smith, co-chair of the firm’s PE practice, and Michelle A. Gyves, a labor and employment specialist, about the #MeToo movement’s impact on PE diligence and the acquisition process. This first article presents their thoughts on how the PE industry recognized and responded to the movement, as well as how it has incorporated #MeToo into the portfolio company and target company diligence processes. The second article
will examine how #MeToo is being addressed in PE acquisition documents, as well as risks sponsors face from being too active in their portfolio company responses to these matters. See “What Fund Managers Need to Know About the Legislative Response to #MeToo
” (May 3, 2018); and “How Investment Managers Can Prevent and Manage Claims of Harassment in the Age of #MeToo
” (Dec. 14, 2017).