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ICG Communications
- Industry: CLEC
- Location: Denver, CO
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Dan Caruso
former Chairman and CEO, ICG Communications
Background
In the wake of the CLEC industry collapse in 2001-2003, Columbia Capital made a strategic decision to invest in the CLEC sector as we believed that certain companies were under valued and offered tremendous opportunity. As part of this effort, Columbia Capital Partner John Siegel and former Level 3 and MFS executive Dan Caruso collaborated for over 18 months during which time they evaluated a number of wire line and IP service providers. They settled on ICG Communications as an attractive investment target. ICG was an early pioneer in the competitive telecom market but had already gone through the Chapter 11 process in the early 2000s. Despite a restructuring of its debt, the company was facing another bankruptcy in 2004. Both Columbia Capital and Mr. Caruso believed ICG had a great collection of assets, but needed to reduce its operating costs and focus its efforts and expenditures on its strongest and deepest markets.
Columbia Capital’s Role
Although more than 35 different parties evaluated ICG in 2004, the Columbia/Caruso group was the only party to bid outside the protection of bankruptcy. This strategy enabled the Columbia/Caruso group to control the asset. Mr. Caruso and Mr. Siegel worked closely to define the Company’s new strategy, which involved the sale of more than 5 different market clusters/business units. Columbia Capital helped to identify a number of the parties with whom the group negotiated its divestitures, especially the first sale of the California markets to Mpower Communications, which was announced two days after the close of the ICG purchase. Through these sales and the operational focus of Mr. Caruso and his team, the Company’s cash burn reversed from a loss more than $8mm/mo to a $1.5mm/mo positive contribution within 9 months.
The End Result
In April of 2006, Level 3 Communications announced its acquisition of ICG’s remaining operations for approximately $174mm of consideration. With these proceeds, in combination with the prior asset sales, Columbia Capital realized a sizable return on its investment in approximately two years.
I view Columbia Capital as much more than an investor. They are a business partner. Columbia Capital understands the communications market and has developed extensive relationships with executives throughout the industry’s ecosystem. Their domain expertise and industry relationships have been an important part of the success I have had with them."
Dan Carusoformer Chairman and CEO, ICG Communications.