Analysis Group Affiliate Opines on “Pushdown” Accounting in Support of Prevailing Plaintiff in Contract Dispute in Transportation Industry

February 8, 2024

Analysis Group was retained on behalf of Pilot Corporation, the plaintiff in an accounting dispute in the Delaware Court of Chancery involving the alleged use of “pushdown” accounting. The defendants, Berkshire Hathaway and National Indemnity Company, owned 80% of Pilot Travel Centers, a truck stop chain, with the remaining 20% owned by the plaintiff. The plaintiff had a put option whereby it could sell its remaining interest in the chain for a multiple of Pilot Travel Centers’ earnings before interest and taxes (EBIT.) The plaintiff claimed that defendants forced Pilot Travel Centers to adopt “pushdown” accounting, an optional accounting election whereby the acquiree’s assets and liabilities are restated from book value to fair value. The plaintiff claimed that pushdown accounting would result in higher depreciation and amortization, significantly reducing the value of the put.

An Analysis Group team including Managing Principals Gaurav Jetley and Richard Starfield, Vice Presidents John Drum and Evan Carter, and Managers Erik Johannesson and Samuel Spare supported academic affiliate John M. Lacey, who filed affirmative and rebuttal expert reports and testified at deposition. Professor Lacey opined on pushdown accounting and whether the defendants’ accounting practices represented an impermissible accounting change under Pilot Corporation’s consent right under its agreement with defendants.

The matter settled prior to trial.