I imagine you're talking about Part TV 126128 (picture is for an 88 420SEL, courtesy of Timevalve.com). Without seeing the hole, it's hard to suggest a repair. Is it on a flat area?... or at a weld?... or corner? How thin is the metal adjacent to the hole?
For stainless steel exhaust systems - which is probably what you have - failure is typically by fracture at a weld. It is not commonly repairable using inexpensive methods. Once it fails at a weld, the only thing you can do is replace the entire system. It's hard to accept this fact considering the rest of the stainless steel system is in relatively good shape. (Don't you just love welds over clamps! It's another manufacturing cost-saver that lowers the price of new cars, yet increases the cost of repair!!) Conventional aluminized low-carbon steel generally degrades over a broader area on the exhaust system.
Unless you can put a muffler patch over the hole, or find some creative way to seal the hole, it's time for replacement. Muffler patch is sold in most auto supply houses.
95 E320 Cabriolet, 131K