'To take a walk in the snow' is a Canadian expression meaning stepping down or that a deal is dead. It dates back to when former Prime Minister Pierre Trudeau stepped out into a typical winter day in Ottawa, the nation's capital, and when he came back decided to resign.
The phrase is appropriate today as there are published stories swirling amidst falling snow throughout Ontario and Quebec that a leveraged buyout (LBO) of Montreal-based Bell Canada Enterprises (BCE), the country's largest communications carrier, scheduled to close Dec.11, 2008 may be doomed.
The Globe and Mail reported an announcement by Bell that it had obtained a 'preliminary view' from KPMG that the accounting firm does not expect to deliver opinion by the close whether the deal would meet the solvency tests. It cited 'current market conditions, its analysis to date and the amount of indebtedness involved'.
The newspaper said that '"Unless this changes by that [the closing] date, BCE warned, the transaction is unlikely to proceed.'"
LBOs are excellent tools to make companies lean and efficient because the added debt burden and the need to reduce it forces firms to cut costs and grow revenues.
Unfortunately for BCE, the completion of this LBO could not come at a worse though in fairness unpredictable time as far the markets are concerned. The tightening economy is already pushing Bell to cut costs; it recently laid off staff at its Montreal, Toronto, Ottawa, and Hamilton offices.
The added debt may strain Bell's ability to compete with competitors in the wireless 4G or Next-Gen and other hot markets by limiting its resources. Bell, like other ILECs haven't quite figured out what to do with its legacy PSTN/TDM network regarding IP. It is losing residential landline customers to cable firms like Cogeco. Fewer dollars means less money to go all IP over copper wires (VoDSL).
Whether the LBO proceeds or not, Bell, even though it is fairly good shape, will be under pressure to merge, and so will its competitors, to expand markets and cut costs arguably truly only possible by becoming integrated coast-to-coast-to-coast 4G wireless/IP landline carriers. Expect rumors and even delivery of M&As such as Bell+Telus and Rogers+Cogeco+Shaw, but only after Bell bleeds more and becomes much less expensive to acquire.
