BlackBerry's Iffy Deal Already Has a Conflict

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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BlackBerry Ltd., the maker of smartphones that aren't quite as smart as its competitors' smartphones, may have a savior after all. The company this afternoonsaid it has a tentative $4.7 billion buyout offer from a group led by a fellow Canadian company, Fairfax Financial Holdings Ltd.

The price would be $9 a share, about 3 percent more than BlackBerry's closing price last week. Fairfax is BlackBerry's largest shareholder. This post isn't about the deal itself, however, so much as it is about the conflicting interests that can arise when companies turn to Big Four accounting firms for consulting advice.

On Sept. 20, the same day that BlackBerrysaid that it would eliminate a third of its staff and record a $960 million inventory writedown, Bloomberg Newsreported that BlackBerry had hired PricewaterhouseCoopers LLP to evaluate the company for potential buyers. The article said the information came from two people with knowledge of the move and that "a team of accountants and lawyers" from the accounting firm "have been working at BlackBerry since August."

A Pricewaterhouse spokeswoman in Toronto, Kiran Chauhan, declined to comment at the time. She didn't immediately return my phone calls today, either.

So, take a wild guess which Big Four accounting firm happens to be the outside auditor for Fairfax. The answer is Pricewaterhouse, of course. So that team of accountants and lawyers shouldn't be working at BlackBerry much longer. There are those pesky rules about auditor independence, after all. For instance, if you're an accounting firm, you really shouldn't be giving deal advice to a company that is trying to get bought by one of your audit clients. BlackBerry's auditor is Ernst & Young LLP.

Consider this something for other public companies to keep in mind the next time they go looking for a deal adviser.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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