Lone Star Investment Advisors scores 6.2x exit

The firm’s $7m investment in Petroplex Acidizing has gone on to generate a 50% internal rate of return through its sale to One Rock Capital Partners.

Lone Star Investment Advisors, a Dallas-based mid-market specialist, has generated a 50 percent internal rate of return and 6.24x cash-on-cash return with its exit of Petroplex Acidizing to One Rock Capital Partners, the firm announced in a statement.

Lone Star, which is not affiliated with distressed specialist Lone Star Funds, invested a total of $7 million equity in Petroplex in 2007, when company owner and chief executive officer Larry Foster decided to transfer ownership.

“At that time, the transaction was a generational transfer. Larry Foster, who was the owner, sold to us,” managing partner Arthur Hollingsworth said. The firm’s investment in the oilfield services company was completed through Lone Star New Markets, a fully-invested $50 million 2006 vintage fund currently in “harvest mode”, he added. 

Tony Cunningham, Foster’s son-in-law, stepped in as CEO after Lone Star purchased the business. Under Lone Star and Cunningham’s watch, Petroplex expanded product offerings in hydraulic fracturing, which is when water and chemicals are shot into shale formations, breaking up the rock layers and releasing deposits of natural gas. The new product offerings, along with the addition of new clients, resulted in a doubling of Petroplex’s annual sales over a five-year period, which represents a compounded annual growth rate of 18 percent, according to the release.

Lone Star is in the process of raising Lone Star Opportunities Fund V, which held a third close on $103 million in equity in September, Hollingsworth said. The firm is targeting $150 million for that fund. 

Lone Star specialises in mid-market businesses in the manufacturing, industrial, distribution, business services and energy sectors, with a focus on investments that will deliver job growth in low-income areas, according to a release.