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The Value Of Valuation

Surely you remember the era when we jumped from one record breaking buyout to another. It wasn't that long ago, after all. Or does it seem forever ago? The peak a year and a half ago had the Ontario Teachers' Pension Plan, Providence Equity Partners, Madison Dearborn and Merrill Lynch's private equity group teaming up to slurp down Canadian telecom giant BCE for a record $41 billion. The announcement by the firms that the deal is dead puts this one squarely into the next superlative era, i.e. waiting for the next litigation bout to mount over the biggest breakup fee ever. ($1.2 billion in this case, which the core four, unsurprisingly, claim they are not going to be paying- damn your eyes, man).
There was, you see, a little twist.
Somewhere, out there, there is a KPMG "valuation expert" who, by delivering the opinion that the resultant entity would be insolvent, may well have saved the core four not just having to own the thing, but the big bil-point-two in breakup.

KPMG's analysis took Wall Street by surprise. Unlike the targets in many other failed buyouts, BCE has seen its operating performance remain solid. The company also has an investment-grade credit rating and almost $3 billion of cash on its balance sheet.

The conspiracy theorist in us can just picture the smoky back room meeting that preceded that report writing. And if it wasn't the core four delivering a big fat carrot and a thinly veiled "Ontario can be a very dangerous place to raise a family, Mr. KPMG valuation expert" threat or two, just imagine what Citigroup, the Germans, the Scotts AND the Canadian bankers would have done to avoid putting $34 billion in debt on the street. So, if you meet a "former KPMG valuation expert" off the coast of Martinique some months hence, looking a bit young for the 70 foot Hinckley he commands, well, you know the scoop.*
*Of course, this is just our imagination running wild. Really wild.
BCE Leveraged Buyout Deal Collapses [The Wall Street Journal]