#MeToo and the PE Industry: Common Mistakes, Potential Risks and the Movement’s Impact on the Deal Process (Part Two of Two)

As a much-needed driver of social change, the #MeToo movement has shed light upon a swath of legal risks that private equity (PE) sponsors are trying to identify and mitigate. It has also generated broad reforms to the PE industry’s customs, as well as the policies, procedures and culture at PE sponsors and their portfolio companies. In their haste to curb this risk at the portfolio company level, however, sponsors need to avoid becoming overinvolved in ways that inadvertently increase their liability. PE sponsors are also making efforts to legally curtail their deal risk via several means, including incorporating #MeToo-related representations and warranties into deal documentation. To better understand the #MeToo movement’s effect on the PE industry and deal process, 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. This second article in a two-part series presents their insights on common mistakes from reviewing companies’ anti-harassment policies and procedures, as well as ways #MeToo-related concerns are entering the deal process. The first article examined the PE industry’s general response to the #MeToo movement, including how sponsors are auditing their portfolio companies and diligencing target companies for these issues. For recent sexual harassment claims involving private fund managers, see “Point72 Complaint Ignites Discussion on Relevant Facts in ‘Hostile Environment’ Lawsuits” (Mar. 22, 2018); and “Portfolio Manager Accuses Former Employer and Supervisor of Retaliation for Reporting Sexual Harassment” (Feb. 15, 2018).

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