If there was any lingering doubt that the days of big buyouts are over, it was effectively dashed Wednesday morning, thanks to an ominous auditing report by KPMG.  

The $42 billion deal to take Bell Canada parent B.C.E. private was on track to become the largest leveraged buyout in Canadian history when it closed on December 11. But the telecom giant announced that an independent valuation by KPMG showed that the company would not be solvent after it has taken on the $33 billion in debt as the deal is currently structured.

B.C.E. said it disagrees with the opinion and it will review the auditor's methodology.

If this takeover fails, it would be yet another blow to the private equity industry, which has struggled to complete so many deals struck before the credit markets froze up last fall. Indeed, the B.C.E. buyers—Providence Equity Partners, Madison Dearborn Partners, the Ontario Teachers Pension Plan, and Merrill Lynch—have already battled their financing partners and bondholders in court.  The deal was struck last June, during the final days of the buyout boom.

The buyers were so sure the deal was on track that they had already started calling capital from their investors to finance the equity portion, Dealbook reported last week.  In pre-market trading, shares of B.C.E. plummeted by 43 percent.

Citigroup, Deutsche Bank, Royal Bank of Scotland and Toronto-Dominion Bank, the banks that have committed to finance this deal, would certainly welcome its collapse.

The news comes just a day after another megadeal fell apart. BHP Billiton, the world's largest mining company, abandoned its yearlong pursuit of Rio Tinto, the No. 3 miner, blaming deteriorating credit markets and a slide in commodity prices.