In an early 2025 decision, the Delaware Court of Chancery ordered specific performance of a merger agreement between Desktop Metal, Inc. (“Desktop”) and Nano Dimension Ltd (“Nano”). The Court’s ruling displayed Delaware courts’ willingness to enforce negotiated obligations in the context of M&A, particularly when covenants are strong, the path to closing is limited, and a party is found to have deliberately obstructed the process.
Desktop had disclosed post-agreement concerns about its financial health, including language in its public findings that indicated “substantial doubt” regarding its ability to continue as a going concern. Desktop alleged that, following a change in Nano’s board composition, the new Nano board engaged in delay tactics that frustrated the progress of the closing process and breached Nano’s contractual obligation to take all necessary actions to consummate the transaction. Desktop filed suit to compel performance under the merger agreement.
Despite the challenges facing the parties and this deal, the Court found that Nano breached its obligations under the merger agreement. Damages were deemed inadequate given the fragile condition of the companies involved and the unique value of this transaction. The Court emphasized that the remaining steps to close the deal were discrete, manageable, and largely within the buyer’s control, which made specific performance a feasible remedy. Notably, the court also rejected Nano’s defenses that relied on Desktop’s financial deterioration and alleged ancillary breaches.
This decision outlines several lessons for parties negotiating or litigating distressed M&A transactions. Courts are willing to enforce strong covenant language, such as “reasonable best efforts” and “hell-or-high-water” obligations, even when there are doubts regarding the financial viability of the target entity or a changed board’s opposition to the deal. Equitable relief is also more likely when the structure of the agreement permits practical enforcement of specific performance.
This decision also serves as an important reminder that businesses considering sale or change of control transactions should carefully review with counsel their termination rights, specific performance obligations, and other deal protections.
**Wolfson Bolton Kochis advises clients on mergers, acquisitions, and distressed transactions in Delaware, Michigan, and nationwide. If you have questions about how this ruling may affect your business or ongoing negotiations, please contact us.**
