Hexion’s Lessons For Private Equity Dealmakers

At its heart, the decision in Hexion Specialty Chemicals, Inc. v. Huntsman Corp. (2008 Del. Ch. LEXIS 134 (Del. Ch. Sept. 29, 2008)) serves primarily as a reminder of certain fundamental principles that dealmakers should keep in mind when negotiating and executing buy-out transactions.

A merger agreement sets forth the rights and responsibilities of each party to the transaction and, in some cases, establishes what it will cost to get out of the arrangement. As the target company, Huntsman's obligation was essentially to deliver a business that met certain expectations, defined by the representations and warranties in the merger agreement and circumscribed by the general principle of Material Adverse Effect. On the other hand, as the acquiring company, Hexion's primary obligation was to use reasonable best efforts to consummate the transaction.