Someone Doing Her Job

Managing Partner Susan Glass of KPMG threw cold water on what was described as the "largest leveraged buyout" of BCE, Inc. of Canada. The deal was predicated on the company taking on $32 billion of new debt, along with sales of various assets now deemed "non-strategic." Spending four weeks or so running numbers under various scenarios, the conclusion of KPMG was that the entity post-buyout would be non-solvent.

We've written before about roots of the current crisis being found in the failure of boards, regulators, and auditors to execute their basic responsibilities. It's really heartening to see an auditor stand up and do their job. Presumably, having done the audit on the company for a while, they understand how their financials work, and something of their businesses. They can run spreadsheets out into infinity as well as as associates at investment banks. Based on this, along with some auditor skepticism and conservatism, BCE received a non-solvency opinion, which kaboshed the transaction per the deal documents.

Their are noises being made about essentially shopping the opinion, or rather engaging an accounting consulting firm to "check" KPMG's assumptions. Let's hope that common sense prevails. This is what the auditor was paid to do, and they have opined. Now let the board and management come up with their own plan to create shareholder value without the risk of insolvency.