Desktop Metal, Inc. v. Nano Dimension LTD. And Nano US I, Inc., C.A. No. 2024-1303-KSJM (Del. Ch. Mar. 24, 2025)
Merger agreements often include “reasonable-best-efforts” clauses, requiring one or more of the parties to take steps necessary to close the merger. The failure to take those steps may, under the terms of the agreement, be grounds for calling off the merger. These situations frequently lead to breach of contract actions seeking specific performance of the clause, where the Court of Chancery is called upon to determine whether the party with the obligation has complied with the clause – a heavily fact dependent inquiry. A variant of the “reasonable-best-efforts” clause is a “hell or high water” clause, which generally requires all actions necessary to achieve an outcome and outlines the specific steps required of one or more of the parties. This decision from the Court of Chancery provides helpful guidance on the difference between such clauses and their application in the merger context.
Seller-plaintiff, a 3D printing company, and buyer-defendant entered into a merger agreement. The deal required regulatory approval by the Committee on Foreign Investment in the United States (“CFIUS”) and the seller had specifically negotiated for a “hell or high water” provision related to CFIUS approval. Following a proxy contest and the replacement of buyer’s board, the buyer sought to terminate the merger, citing the lack of CFIUS approval.
The seller filed suit in the Court of Chancery seeking to specifically enforce the “hell or high water” clause. After an expedited trial, the Court found that the buyer had breached the provision. The Court observed that the parties had gone beyond a typical “reasonable-best-efforts” provision and “expressly spelled out what is or is not required” in connection with receiving CFIUS approval. As the Court explained, a “hell or high water” provision generally attempts to clarify what constitutes reasonable best efforts. The Court noted that the record demonstrated the buyer’s failure to undertake its contractually-mandated efforts by intentionally delaying and seeking to scuttle the CFIUS approval. After rejecting other contractual defenses proffered by the buyer, the Court ordered specific performance of the merger agreement.
