DealLawyers.com Blog

Last Friday, the Chancery Court issued a post-trial memorandum opinion in Verisk Analytics v. ExactLogix (Del. Ch.; 8/26) finding that a buyer was not entitled to terminate a merger agreement at the outside termination date because its actions were the “primary cause” of the FTC issuing a second request, preventing the expiration of the HSR waiting period from occurring by that date. Here are snippets of Vice Chancellor David’s summary of the facts:

AccuLynx and Verisk believed when they signed the merger agreement that the merger presented only minimal antitrust risk, as the companies did not compete horizontally or have a vertical supplier-customer relationship. Verisk’s business includes “integrating” software with customers to support insurance claims estimation, but Verisk had integration agreements with only a small number of AccuLynx competitors.

Prior to the merger, Verisk was engaged in discussions with one such AccuLynx competitor, ServiceTitan, Inc., about developing an “enhanced” integration that would offer better pricing features than Verisk’s standard integration. When Verisk agreed to the merger, it decided to end those discussions and negotiate a standard integration with ServiceTitan instead.

Soon after the FTC opened its preliminary investigation into the merger, ServiceTitan told the FTC about Verisk’s decision to abandon the enhanced integration. That unusual decision prompted the FTC to develop a novel “market reset” theory of competitive harm centered on Verisk’s plans to integrate with AccuLynx competitors [. . .]

Over the following weeks, the FTC repeatedly asked Verisk in different ways whether it had ever terminated integration discussions with an AccuLynx competitor or rejected a request for an enhanced integration. Verisk did not realize that the FTC was specifically referring to ServiceTitan and repeatedly told the FTC that the answer was “no” when the FTC knew from ServiceTitan that the answer was “yes.” Verisk’s outside counsel eventually learned of Verisk’s discussions with ServiceTitan and disclosed them to the FTC. Thereafter, the FTC issued a “second request” focused on Verisk’s integrations [. . .] Verisk purported to terminate the merger agreement on the extended termination date.

But Vice Chancellor David’s conclusion is notable because, as the decision indicates, “The facts of this case stand apart from other broken deal cases in which a buyer tried to avoid its obligation to close.”

The trial record here revealed virtually no evidence suggesting that Verisk intended to scuttle the deal. Verisk witnesses credibly testified that but for the uncertainty and cost presented by a lengthy Second Request process, AccuLynx remained an attractive acquisition target for Verisk, and no contemporaneous evidence suggests otherwise.

Verisk tried in earnest to convince the FTC that its “market reset” theory was unfounded and that it should not issue the Second Request, and once issued, that the FTC should find the Second Request satisfied based on information produced under the quick look agreement. Verisk met with the FTC nearly 30 times; hired experienced legal advisors, expert economists, and a government affairs firm to advocate for FTC clearance; and spent nearly $8 million in legal fees to review roughly four million documents from 16 custodians under the quick look agreement. Moreover, although Verisk misrepresented and omitted information in response to FTC questions by failing to disclose Verisk’s discussions with ServiceTitan about an Enhanced Integration, its missteps were not intentional.

But the merger agreement foreclosed termination by a party whose “willful conduct” was the “primary cause” of “the failure to satisfy any condition to the obligations of the Parties.” VC David distinguished the term “willful conduct” from “willful breach,” finding that the former encompasses “any voluntary and intentional conduct that caused a condition to fail.” VC David also found that AccuLynx proved at trial that the FTC would not have required full compliance with the Second Request but for Verisk’s decision to switch to standard integration with ServiceTitan. She ordered specific performance and found that AccuLynx was entitled to damages for direct costs and prejudgment interest.

– Meredith Ervine