Background
Verisk Analytics agreed to acquire ExactLogix, which operates AccuLynx.com, for $2.35 billion in cash. The merger required Federal Trade Commission clearance under the Hart-Scott-Rodino Act. Although the parties initially viewed the transaction as presenting little antitrust risk, the FTC developed a “market reset” theory under which Verisk might favor AccuLynx over competing roofing-business software platforms when providing integrations with Verisk’s claims-estimation products.
That concern arose after Verisk ended discussions with AccuLynx competitor ServiceTitan about an enhanced integration. Six days after announcing the merger, Verisk told ServiceTitan that, in light of the AccuLynx acquisition, it would offer only the standard integration available to other platforms. ServiceTitan informed the FTC, while Verisk repeatedly failed to identify the terminated discussions in response to the agency’s questions. The FTC issued a second request and ultimately required full compliance, preventing expiration of the HSR waiting period before the extended termination date. Verisk then purported to terminate the merger agreement and sued for a declaration that its termination was valid; AccuLynx counterclaimed for specific performance and damages.
The Court’s Holding
The Court held that Verisk’s termination was invalid under Section 9.1 of the merger agreement. That provision barred termination when a party’s “other willful conduct” was the primary cause of a failed closing condition. The Court interpreted “willful conduct” to mean voluntary and intentional conduct, without requiring a contractual breach, bad faith, or an intent to derail the deal. Verisk’s intentional decision to send the email ending enhanced-integration discussions with ServiceTitan therefore qualified.
AccuLynx proved by a preponderance of the evidence that the email was the primary cause of the FTC’s market-reset concern and resulting second request, which prevented the HSR condition from being satisfied before the termination date. The Court found no evidence that Verisk deliberately misled the FTC or intended to scuttle the transaction, and it did not decide whether Verisk materially breached its commercially reasonable efforts obligations. Nevertheless, because Verisk’s willful conduct caused the failed condition, it could not terminate. The Court ordered Verisk to perform under the agreement, including using commercially reasonable efforts to obtain HSR clearance and closing if the FTC approves the merger, and awarded AccuLynx $3.85 million in direct costs plus prejudgment interest.
Key Takeaways
- A merger agreement’s reference to “willful conduct” can encompass intentional business conduct even when the conduct is not wrongful, undertaken in bad faith, or intended to breach the agreement.
- A party cannot invoke an outside-date termination right when its own intentional conduct was the primary cause of the regulatory obstacle that left a closing condition unsatisfied.
- The Court may compel continued regulatory efforts and an eventual closing where sophisticated parties agreed that specific performance was available and the equities favor enforcement.
Why It Matters
The decision underscores that Delaware courts will closely parse the distinct mental-state and causation language used in merger termination provisions. By using “willful conduct” rather than “willful breach,” the parties adopted a broader restriction that did not depend on proof that Verisk acted improperly or intended to frustrate the transaction.
The ruling also highlights the deal risk created by ordinary-course decisions made immediately after signing. Even though Verisk later spent millions of dollars advocating for clearance and the Court found no intentional deception, its post-signing communication to a competitor supplied the factual basis for the FTC theory that delayed approval and ultimately foreclosed termination.