Delaware Chancery Court Enforces Buyer Obligations in Cross-Border M&A Dispute

According to an article by the Cadwalader firm, a recent ruling from the Delaware Court of Chancery in the M&A dispute Desktop Metal Inc. v. Nano Dimension Ltd. reaffirms Delaware’s strong commitment to deal certainty and the enforceability of efforts-based covenants in merger agreements. 

The case centered on whether Nano Dimension, the buyer, breached its contractual obligations to diligently pursue regulatory approvals, particularly under a stringent “hell-or-high-water” provision, after agreeing to acquire Desktop Metal. The Court’s decision underscores the importance of negotiated commitments, especially when timing and closing certainty are critical.

The merger agreement required Nano to use “reasonable best efforts” to close the deal quickly and resolve any regulatory objections, including securing approval from the Committee on Foreign Investment in the United States (CFIUS). Despite these covenants, Nano’s newly installed leadership, following a hostile board takeover, actively sought to unwind the deal and delayed engagement with CFIUS. The Court found these delays, such as taking 38 days to respond to simple mitigation measures, constituted a clear breach of Nano’s obligations.

Nano argued that Desktop’s deteriorating financial condition justified its reluctance to close. However, the Court rejected that defense, noting the risks were well known at signing and that the agreement already addressed Desktop’s financial instability through specific provisions. Nano’s claims that Desktop breached obligations around a bridge loan and transaction expenses were also dismissed, with the Court emphasizing that Desktop’s conduct remained consistent with the agreement’s terms.

This decision provides clear guidance for transactional counsel during an M&A dispute: when parties negotiate strong efforts provisions, especially in cross-border transactions subject to CFIUS review, Delaware courts will expect strict compliance. It also illustrates the Chancery Court’s willingness to grant expedited relief, as the matter was resolved within three months. Practitioners should take note that hell-or-high-water means exactly that.