In Texas Lawyer Article, David Sweeney Discusses Increased Deal Emphasis on Fundamentals, Flexibility and Focus

Texas Lawyer has published the article “2018’s Increased Attention on Fundamentals, Flexibility and Focus,” written by Akin Gump oil and gas partner David Sweeney, which looks at the defining characteristics of the exploration and production industry this year. “Increased bank regulation and concentration of capital in the hands of fewer providers,” Sweeney writes, “have created a gap in lower middle-market exploration and production industry transactions.” As a result, he says, there has been a change in the way lawyers are advising clients engaged in this market.

Sweeney first examines what he describes as a funding gap that has “limited debt capital availability relative to what has historically been available.” This has led to situations in which “a number of smaller [private equity] funds, typically with smaller support structures and overhead, have been able to take advantage of opportunities that are too small for large funds but too large for angel or family office investment.”

The article then turns to the shifting environments that have required lawyers “to refocus their attention on the fundamentals of the transaction, possess the flexibility to adjust structures and return profiles to fit the transaction, and seek the ability to stay ahead of transactions by focusing on the environment in which the transaction occurs.”

Sweeney concludes by observing, “clients have begun to demand that counsel act as a partner and not just a provider of legal services.” This is particularly true, he says, for lower middle-market transactions that are sensitive to costs. With the number of lower middle-market transactions in the E&P space having increased quite a bit this year, “effectively serving clients in this market segment in 2019 and beyond will entail an increased focus on value.” In the context of these transactions, this will require outside counsel to match the client’s attention to fundamentals, flexibility and focus.

To read the full article, please click here.