The Delaware Court of Chancery’s recent decision in Verisk Analytics, Inc. v. ExactLogix, Inc. d/b/a AccuLynx.com sheds light on how the Delaware courts will interpret contractual language, balance equities and grant specific performance. The outcome of this case should move the specific performance provision out of the merger agreement’s “boilerplate” section and into the boardroom.

Vice Chancellor Bonnie W. David held that Verisk could not terminate its $2.35 billion agreement to acquire AccuLynx after a Federal Trade Commission (FTC) second request pushed the transaction beyond its outside date. The court determined that, under the language of the negotiated contract, Verisk’s willful conduct was the primary cause of the delay in obtaining antitrust approval and, as such, ruled that Verisk’s termination was not valid, and ordered Verisk to continue using commercially reasonable efforts to obtain Hart-Scott-Rodino (HSR) Act clearance and close the transaction if the FTC approves it.

The striking part is what the court did not find. This was not a classic buyer’s-remorse case where the purported termination was a way to get out of a deal that the buyer regretted post-signing. The court found virtually no evidence that Verisk intended to scuttle the acquisition. Verisk met with the FTC nearly 30 times, hired experienced advisers and lobbyists, and spent almost $8 million responding to the agency.

Verisk lost anyway. Under the language the parties negotiated in the merger agreement, an intentional business decision terminating negotiation of an enhanced integration with a competitor of AccuLynx, was enough to eliminate Verisk’s right to validly terminate the merger agreement if that decision was the “primary cause” of the failed closing condition. This was so, even if that decision was not made in bad faith, not an action constituting a breach of the agreement and not undertaken as a deliberate effort to kill the deal.

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