Sevin Rosen Funds, one of the oldest and most successful venture-capital firms that backs technology start-ups, says it is returning money to its investors, rather than investing those funds, because it now thinks current investment opportunities are not attractive. Might this attitude migrate to the private-equity funds and hedge funds that back oil and gas deals?
This question was posed recently in a report by long-time service analyst G. Allen Brooks of Houston-based Parks Paton Hoepfl & Brown, an energy investment-banking firm that specializes in the service and supply sector.
Sevin Rosen was raising Fund X when it did an about-face and told its investors that the current environment was indicating poor returns lay ahead, problematic exit opportunities in the future, and that too much money is chasing too few good deals. The firm stopped raising money.
Many oil industry experts have noted that in the energy space, the same problem holds true-that too much money is chasing too few deals. "Sevin Rosen's decision, and the rationale behind it, presents an interesting backdrop for the current surge in energy private-equity investing," Brooks said.
"Last spring we heard a partner from HM Capital Partners LLC discuss the change at his organization in light of the challenges for generating superior returns for its investors." HM founder Thomas Hicks retired from the Dallas-based private-equity firm that does energy deals, and this was cited as a possible reason.
Brooks noted that, since last spring, the IPO climate for energy has weakened as some issues have been delayed and those that have gone forward have not traded very well. This does not bode well for eventual exit strategies for new E&P or service companies. Too, commodity prices and stock prices are down. Brooks wonders if private-company valuations for acquisitions or mergers might have peaked.
"If Sevin Rosen's view...proves true for all industry sectors, then energy private-equity investors should be concerned," Brooks concluded.
This question was posed recently in a report by long-time service analyst G. Allen Brooks of Houston-based Parks Paton Hoepfl & Brown, an energy investment-banking firm that specializes in the service and supply sector.
Sevin Rosen was raising Fund X when it did an about-face and told its investors that the current environment was indicating poor returns lay ahead, problematic exit opportunities in the future, and that too much money is chasing too few good deals. The firm stopped raising money.
Many oil industry experts have noted that in the energy space, the same problem holds true-that too much money is chasing too few deals. "Sevin Rosen's decision, and the rationale behind it, presents an interesting backdrop for the current surge in energy private-equity investing," Brooks said.
"Last spring we heard a partner from HM Capital Partners LLC discuss the change at his organization in light of the challenges for generating superior returns for its investors." HM founder Thomas Hicks retired from the Dallas-based private-equity firm that does energy deals, and this was cited as a possible reason.
Brooks noted that, since last spring, the IPO climate for energy has weakened as some issues have been delayed and those that have gone forward have not traded very well. This does not bode well for eventual exit strategies for new E&P or service companies. Too, commodity prices and stock prices are down. Brooks wonders if private-company valuations for acquisitions or mergers might have peaked.
"If Sevin Rosen's view...proves true for all industry sectors, then energy private-equity investors should be concerned," Brooks concluded.
Comments
Recommended Reading
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.