Both of the local Denver papers ran good summary articles on the closing of the sale of Adelphia to Time Warner Cable and Comcast.  This was a long and arduous process – when Adelphia went into bankruptcy there was some talk of a straight liquidation given how much of a mess the Rigas family and prior management had made of it.  This has been a high profile deal in Colorado and both Time Warner Cable and Comcast have deep roots in the Colorado cable scene.  If you follow this, both articles – DenverPost: Adelphia execs exit as sale finalized and RockyMountainNews: Adelphia’s assets now in hands of cable giants – are good descriptions of the end of this particular story.

Technorati Tags: acquisitions colorado

Last week, a private equity group led by KKR, Bain Capital, and Merrill Lynch announced that they were acquiring HCA for $33 billion.  HCA is the largest hospital operator in the United States, owning or operating 176 hospitals, 92 freestanding surgery centers and facilities for outpatient and ancillary services in 21 states, England and Switzerland.

Stan Feld (my dad – a retired endocrinologist and – among other things – the inventor of “the neck check”) – who has been writing a blog for several months titled Repairing the Healthcare System – sees this deal as another step backward.  He’s spent the past few months deconstructing the problems with today’s healthcare system in the US and is starting to put together the building blocks for his solution.  He shines a light on some of the potential second order effects of a deal like this which he concludes:

If I am correct, rather then decreasing the cost of care through efficiency of care and an increased quality of care to decrease complications of chronic disease, we will see an increase in cost of care.

The deal is far from done and there’s plenty of chatter about other potential syndicates forming to make an offer along with the predictable shareholder lawsuits to block the deal, presumably with the goal of increasing the price on the deal.  Regardless of the ultimate outcome, the largest private equity deal to date will undoubtably be interesting to watch unfold.

Technorati Tags: hca, healthcare, private_equity, stanfeld

Colorado saw two big acquisitions this week – both in the telecomm (which – in my universe – includes what used to be called cable) sector.

On Friday, Time Warner Telecom announced that it acquired Xspedius Communications for $531.5 million.  Colorado VC Meritage was the first round investor in Xspedius and will get a nice return from this deal when it closes.  Congrats to my friends at Meritage.

Also – on Friday – we were reminded that the sale of Adelphia’s assets have been finalized.  Adelphia officially goes away on Monday, with some of it going to Comcast and some going to Time Warner.  This has been a massively non-trivial exercise for the turn around team lead by Bill Schleyer and Ron Cooper (previously head of AT&T Broadband until it merged with Comcast in 2002) – I’m betting there are a lot of people that are going to take at least a week off.  Congrats Ron and crew for salvaging this mess.

While it’s hard to categorize Liberty Media as a telecom company, it most definitely is a Colorado technology / Internet / media company.  Liberty Media also bought up a company last week, announcing that they’d acquired BuySeasons, which calls itself the largest online custome retailer.

As usual, Silicon Valley and most of the tech blogosphere paid little attention as this was overshadowed by the massive acquisition of Mercury Interactive by Hewlett Packard for $4.5 billion.  Ironically, Mercury has a nice presence in Boulder as a result of their acquisition of Freshwater Software in 2001 for $147 million.  I hope my friends at Mercury are enjoying the nice increase in the value of their stock options – hopefully they were all granted at appropriate prices.

Technorati Tags: acquisitions, m&a, colorado, hpq, merq, twtc, lcapa

Fred Wilson has a great, thoughtful post up titled “Scars From The Last Bubble.”  If you are a VC or an entrepreneur, I recommend you read it slowly.  Remember, it’s not a success until you can buy beer with the cash.

Fred Wilson has a good answer up to a question that was posed to him the other day about VCs and fees.

Our startup company recently started seeking funding and the first firm we presented to has shown some interest. However, they have now sent us a Due Diligence Agreement and are requesting a “one time good faith due diligence payment of $9,000”.  Is it standard industry practice to charge the entrepreneur a fee for the due diligence? We are obviously short on cash – paying $9k to every VC who shows an interest in us sounds counterproductive.

The short answer is “no.”  Fred’s longer answer is great and the first comment nails it.

Paul Kedrosky has a great article up on PE Week Wire about Venture Capital Best Practices.  His conclusion – “There are no best practices in venture capital.  You’ve either got it, or you don’t.” 

Last Thursday, Tucows announced that it was buying Boulder’s NetIdentity.    At a deal value of over $20m, it’s healthy for a company with only 10 employees, although my understanding is that NetIdentity was very profitable.  Four other Boulder software companies have been bought in the past few months – @Last (Google), Vexcel (Microsoft), Wall Street on Demand (Goldman Sachs), and Micro Analysis & Design (Alion).  I sense opportunities for luxury goods retailers in the Boulder County area.

Just when you thought you’d never hear from me and Jason on 409A again, we received the following missive from a lawyer friend of ours:

(The) IRS is now saying that drafting final regs is too hard and that they won’t be out until late summer/early fall.  That translates into September/October in my head. Apparently they’re having issues with putting together startup valuation rules.

Well, at least we don’t feel so stupid now thinking that complying with 409A is an almost impossible task.  As previously stated in our 409A series, the idea of coming up with any “real” private company valuation is, at best, a shot in the dark.  Nice to see the IRS struggling with a monster of its own making. 

We can’t wait to see what guidance they come out with.

A reader asked me the other day if – in the words of Charlie Munger – I have a “mental model” for investing in early stage companies.  I do, but I’d rather give examples of the two best approaches I’ve heard of from other people.

This first approach is David Cowan’s Road Map investing at Bessemer.  He recently wrote a short “road map post” on Television 2.0.  While it’s really just a pithy overview of what David is starting to think about, it gives a good feeling for what the executive summary of a new road map might look like.

The other approach is Jerry Colonna’s “Analog Analog.”  When Jerry was actively investing in stage one of the commercial Internet (1995 – 2000), his premise was that every technological innovation (or technology business) has a real world, non-digital analogy.  It’s not the “nothing new is ever invented” paradigm – rather it’s the “learn from the past” paradigm.

Lots of VCs talk about their “process”, “investment thesis”, “company building model”, “value add model”, or other such cliche-ish phrase.  Some of the great VCs really do have a mental model that they can articulate; the balance of the great VCs don’t have one that they can (or choose) to articulate.  However, most of the not so great VCs will have “something else” that they use to frame their investing.  As with everything in life, “beware of a man with a hammer as everything will look like a nail to him.”