When the credit crisis struck, many buyers that had signed
but not yet closed leveraged deals found themselves with a
lemon: either the target could no longer support the leverage
that was originally contemplated or, in many cases, the
financing was no longer available. Some reacted to these
unforeseen developments by renegotiating their deals, while
others tried to walk away.
These efforts have spawned litigation that has focused the
courts' attention on the drafting and enforceability of
covenants and remedies under purchase agreements. Dow Chemical
Company's (Dow) strategic acquisition of Rohm and Haas (Rohm)
was no exception, and even though this battle was ultimately
settled out of court and the merger was completed, the issues
raised leading up to the trial may influence the drafting of
future acquisition agreements.
The deal On July 10 2008, Dow and Rohm signed a merger
agreement for Dow to acquire Rohm for $78 in cash...