Energy is another sector that many private equity firms are banking on. Energy funds have been able to raise their fair share of capital. For example, White Deer Management raised $1.4 billion for White Deer Energy LP II, while a smaller firm, Houston-based Pelican Energy Partners, was able to raise $105 million for its debut fund Pelican Energy Advisors LP. Private equity giants are also chasing investments in the sector. In 2012, the Blackstone Group (NYSE: BX) raised its first fund dedicated to the energy space, while Kohlberg Kravis Roberts & Co. (NYSE: KKR) recently closed a $4 billion fund for investment in energy and infrastructure.

Energy deals will continue to gain momentum. As almost everyone calls for more energy security and less reliance on imported oil and gas, energy companies are making headway by drilling shale deposits in North America. The technology used to extract oil and gas has gotten a lot better making drilling in the U.S. less risky, which is leading to a lot more opportunity. There are deals to be made in all parts of the energy value chain as a result of the better technology.

"There is strong interest from the LPs around energy," says Kelly DePonte of Probitas Partners. "There's interest in upstream and midstream, and there are new service companies to help the frackers. There are also companies doing things around power generation, which is attracting interest from the LPs." Investors are showing interest in just about any company that makes energy more efficient overall, he adds.

Pelican Energy Partners is one of the rare new private equity firms that has been able to raise a fund. Joe Welsh, a managing director with the firm, says he and his team were able to raise a new fund because they are not private equity pros conducting energy deals, but rather energy pros making private investments. Welsh and his partners launched the firm in the summer of 2011 and started raising the first fund at that end of that year. While not a huge fund by any means, the firm did manage to hold a final close in February with $105 million in commitments.

"Energy is a good place to invest," says Welsh. "We've been in the industry for a while, and domestic production on wells is increasing. There are a lot more opportunities to get more out of a well than there were 10 years ago, and we expect the work around the industry to continue to increase," predicts Welsh, whose firm has completed four investments to date. For more on the sector, see "Fracking Fuels Energy Deals" in the December 2012 edition of Mergers & Acquisitions.

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