Jonathan Farber and John Reynolds walked out of Goldman Sachs four years ago. Longtime oil and energy sector public equity analysts, they wanted to invest where they saw the biggest opportunity – private energy companies valued between $20 million and $50 million.
So they formed Lime Rock Partners, a Westport, Conn.-based private equity firm, and closed its debut investment fund with $105 million in October 1998. A dozen investments later, after the sale of three of its portfolio companies and returning all of their limited partners’ invested capital, Lime Rock began marketing a second investment fund with a $200 million target. Last week, Lime Rock closed that fund, Lime Rock Partners II, with $320 million in its coffers.
Although it is more than triple the size of the firm’s first fund, its investment strategy will not change: The firm will invest between $5 million and $15 million in energy companies whose enterprise value ranges from $20 million to $50 million. They are searching for companies in the market for growth capital that have an active revenue stream, a well-developed product or technology and a handful of customers.
“They’re the same opportunities with the same types of companies. There’s tons of exciting smaller companies growing 15% to 25% a year that don’t have an outlet to turn to for growth capital,” said co-founder Farber, one of the firm’s five managing directors.
Lime Rock usually invests alone in a deal, putting enough equity in a company to build its manufacturing capabilities or to give it access to new markets, before preparing the company for sale to a larger industry player or an IPO. Lime Rock will invest in exploration and production, midstream services, oil field services and oil field technology companies.
Boston’s Monument Group began selling the fund to institutional investors at the beginning of this year. The agent secured a list of 40 institutional limited partners-endowments, foundation and pension funds. All but two of the investors of the firm’s first fund came back for a repeat performance.
Lime Rock also has offices in Houston, Calgary and the U.K. and invests in companies in those three areas.