M/C Venture Partners Completes $460 Mln Sale of Cavalier

M/C Venture Partners said Tuesday that it has completed the sale of Cavalier Telephone to PAETEC for $460 million. Cavalier, of Richmond, Va., provides telecom services to residential and business customers. PAETEC is a telecom company based in Fairport, N.Y. M/C Ventures is a VC firm focused on communications, media, and information technology sectors.

PRESS RELEASE

M/C Venture Partners, a leading investor in communications services, today announced it has formally closed the sale of Cavalier Telephone, Inc., to PAETEC (NASDAQ: PAET), crowning a long history of successful investing in the Competitive Local Exchange Carrier (CLEC) space. The all-cash valuation of Cavalier Telephone in the transaction is $460 million.

The purchase of Cavalier by PAETEC represents one of the larger CLEC acquisitions in recent years and follows the $643 million sale of M/C Venture Partners’ portfolio company NuVox to Windstream (NASDAQ: WIN) earlier this year.

Cavalier was M/C Venture Partners’ last major asset in the CLEC segment, concluding a two decade-long strategy of successfully investing in facilities-based carriers. The firm has also previously invested in Brooks Fiber, Ovation, Phone Michigan, FDN, ICG and NuVox. Across this portfolio of CLEC investments, M/C Venture Partners invested $212M with a total return of $550M, a Multiple of Invested Capital of 2.6x, and an IRR of 32.6%.

“We achieved tremendous success in CLECs as a result of our domain experience and consistent focus on regional facilities-based carriers,” said James Wade, managing general partner, M/C Venture Partners. “We avoided the pitfalls of either investing in pure re-sellers or trying to back a national start-up in a capital intensive business. We backed proven entrepreneurs in the space, such as Brad Evans, who was a key executive at Brooks Fiber and then went on to found both Phone Michigan and Cavalier. We were also able to attract an extremely talented management team to Cavalier, led by CEO Danny Bottoms. In the past few years, that team maximized the value of Cavalier by separating out and then significantly growing the revenue of Cavalier’s fiber subsidiary, Intellifiber.”

“M/C Venture Partners’ guidance and financial support over the past decade was instrumental in getting us to the point of this sale,” said Danny Bottoms, CEO, Cavalier Telephone. “They consistently helped us navigate some very turbulent market waters to ensure a successful outcome in the end.”

“M/C Venture Partners has been an unwavering supporter of Cavalier Telephone since its first investment in the company in 1999,” said Brad Evans, founder, Cavalier. “The firm has always ensured that Cavalier has had the guidance and resources to consistently stay the course and remain in position for successful growth and ultimately, acquisition. We are very grateful to have had M/C Venture Partners as our primary investor.”

About M/C Venture Partners

M/C Venture Partners is a venture capital firm focused exclusively on the communications, media, and information technology sectors. The firm has invested over $1.5 billion into nearly 100 companies in those sectors. Companies M/C has backed include Attenda, Cavalier Telephone, Corelink, Fusepoint, ICG Communications, Legendary Pictures, Lightower, MetroPCS, NuVox, Open Mobile, Public Mobile, Seven Networks and Zayo Group. The firm has strong institutional backing from the nation’s leading pension funds and endowments as well as a long track record of success. M/C Venture Partners has offices in Boston, San Francisco and London. For more information, visit www.mcventurepartners.com.