Firm: OFS Energy Fund
Fund: OFS Energy Fund II
Target: $75 million
Amount Raised: $90 million
Placement Agent: None
OFS Energy raised $90 million for its sophomore fund, OFS Energy Fund II, topping its $75 million target and nearly doubling the size of the predecessor fund, the firm announced last month. McMayon said the firm typically writes $10 million to $15 million equity checks for lower mid-market companies with enterprise values between $5 million and $100 million.
Backers of Fund II include fund of funds managers Bowside Capital LLC and Siguler Guff, McMayon said. In all, institutional backers contributed 55 percent of the commitments to the new fund, with the remainder coming from wealthy individuals, primarily entrepreneurs from within the industry, many of whom also had backed Fund I in 2008.
“Our industry is very entrepreneur friendly,” McMayon said, adding that OFS Energy focuses exclusively on energy services companies with no exploration and production investments. “Our objective was to stay below the radar of the auction deals.”
Because the target companies are smaller, so are the equity checks. OFS Energy seeks to do its deals at 3x to 4x EBITDA, with 50 percent equity contributions and 50 percent debt, McMayon said. “When you’re not paying a high multiple, you can be more conservative with your capital structure.”
OFS Energy was established in October 2008 by McMayon and Bruce Ross, the managing partner, both of whom had significant energy service experience, according to the Ultimate Oilfield Guide, an online directory of service providers. That fund, originally called Dorado Energy Partners, attracted $46.5 million and has generated an approximate 3.5x cash-on-cash return in three years, the firm said in the press release announcing the new fund.
And while the firm is willing to do add-on deals—one of its first Fund I deals involved the combination of two complementary companies to form a roll-up called Dorado Oil Service LLC—“first and foremost, it’s organic growth,” McMayon said. “We buy into these companies because we believe there’s an opportunity to double or triple the size of the business.”