Diving Into Delaware’s Enforcement of Specific Performance in M&A Transactions
Most M&A agreements include specific performance provisions that allow either party, under certain circumstances, to seek to have a court force the other party to comply with its contractual obligations. In M&A deals, a specific performance dispute often goes to the very heart of the deal – a buyer no longer wants to close the […]
Barbara Borden and Sarah Lightdale are Partners and Jenna Miller is a Resource Attorney at Cooley LLP. This post is based on their Cooley memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
Most M&A agreements include specific performance provisions that allow either party, under certain circumstances, to seek to have a court force the other party to comply with its contractual obligations. In M&A deals, a specific performance dispute often goes to the very heart of the deal – a buyer no longer wants to close the deal, and the other target/seller seeks to use the specific performance remedy to force the buyer to close the deal (or vice versa). Forcing a party to complete a transaction may be the preferred outcome for sellers, particularly if the target’s business experiences turbulence while the deal is pending and it is unclear if the sellers will be able to recover sufficient damages to cover losses resulting from a failed deal. While the recent amendments to the Delaware General Corporation Law clarify that a target can pursue lost premium damages if the M&A agreement expressly permits such recoveries, these damages may be challenging to ascertain and obtain through a judgment and may not fully compensate for the overall loss.
