Delaware Court Defines ‘Willful Conduct’ in Merger Dispute

A Delaware Court of Chancery decision addresses what counts as improper conduct when a buyer’s actions during a pending $2.35 billion merger contribute to failed regulatory approval, ultimately preventing that buyer from walking away from the deal.

Paul, Weiss writes about the decision in a recent article and explains that the ruling offers guidance on how courts interpret common merger agreement provisions governing termination rights.

Merger agreements often include conditions requiring antitrust clearance before closing, along with provisions preventing a party from terminating the deal if its own misconduct caused closing to fail.

Disputes frequently arise over how strictly to interpret terms like “willful conduct.” Parties often use varying language to describe different standards of culpability.

In Verisk Analytics, Inc. v. ExactLogix, Inc., the Delaware Court of Chancery found that Verisk triggered heightened regulatory scrutiny from the Federal Trade Commission (FTC) when it decided to end enhanced integration talks with a competitor of its acquisition target.

The court determined that this conduct met the contract’s “willful conduct” standard—requiring only intentional action rather than bad faith—and primarily caused the deal’s failure to close on time.

As a result, the court ruled that Verisk could not lawfully terminate the agreement. The ruling compelled Verisk to keep pursuing regulatory clearance and complete the acquisition if approved.

The opinion also examined how business decisions made during a merger review can shape a regulator’s theory of competitive harm when parties do not fully disclose relevant information early in the process.

Deal counsel should carefully align termination and causation language throughout merger agreements, as courts may read inconsistent terms as intentionally creating different legal standards.

They should also advise clients negotiating regulatory approvals to avoid altering business relationships with competitors or customers while a merger is pending.

Counsel should structure deals with the expectation that courts may enforce completion of a transaction even absent bad faith.