Pilot Flying J Travel Centers Earnout Settlement & Accounting

The multi-phase acquisition of Pilot Travel Centers by Berkshire Hathaway devolved into one of the most high-stakes corporate accounting battles in Delaware legal history. Mergers and acquisitions case studies in the Berkshire Hathaway 13F Warren Buffett portfolio playbook detail how earnout valuation formulas triggered mutual lawsuits between the Haslam family and Berkshire.

Under the original 2017 buyout contract, Berkshire acquired an 80% stake while the Haslam family retained an annual option to sell their remaining 20% stake based on a ten-times multiple of trailing twelve-month Earnings Before Interest and Taxes (EBIT).

The Haslam family alleged Berkshire applied aggressive pushdown accounting and diverted wholesale fuel contracts to depress Pilot’s reported EBIT. Berkshire counter-claimed the Haslams improperly bribed Pilot executives with personal side-payments to inflate earnings. On the eve of trial, the parties settled, clearing the way for Berkshire to purchase the final 20% stake for approximately $2.6 billion.