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— Dealmakers —
When Mike McMahon, co-founder of Pine Brook Road Partners LLC, approached a Marine Corps recruitment officer in 1968, he had every intention of joining the U.S. military. But he was turned away after he questioned the recruiter on the feasibility of winning a war in Vietnam. If that didn't save his life, then it certainly hastened his financial career. McMahon graduated from Brown University in 1969 with an A.B. in American civilization, a degree that combined his fascination with literature and history -- particularly military history. His first job was as a reporter for the Providence Journal. It wasn't long before he figured out he "wasn't going to be the next Ernest Hemingway." But McMahon kept an eye on finance. In September 1970, he joined the "University of J.P. Morgan," back when the New York bank hired recent undergraduates into a yearlong training program. While there, McMahon went through the rigors of accounting with former Securities and Exchange Commission chief accountant John "Sandy" Burton as mentor.
McMahon stayed with J.P. Morgan for 10 years. In 1977, he began focusing on energy, just after completing a middle management development course at Harvard Business School. Energy was "hot," he recalls. "It was the last time that oil was on its way up to $100 [a barrel]." His experience helped launch a long career in the energy sector as an adviser and investor. He worked at Salomon Brothers Inc. for a time and then at the now-bankrupt Lehman Brothers Holdings Inc. He tried the principal side and founded cleantech venture capital firm RockPort Capital Partners. He also did a spell at Harvard Management Co., where he was responsible for direct energy-related private equity investments. Then, in 2006, McMahon co-founded Pine Brook, a New York private equity shop that makes growth equity investments in energy and financial services. It recently closed its first fund, the $1.43 billion Pine Brook Capital Partners LP, in April. So far, its energy deals have been in oil and natural gas. In April, it invested $100 million of equity in Global Oilfield Services Inc. The Houston company provides equipment installation and maintenance at well sites in North America, Latin America, the Middle East and Asia, particularly Australia and Indonesia. About a year ago, Pine Brook committed a $100 million equity line to a joint venture set up to help Australian oil and gas producer Comet Ridge Ltd. develop assets in the U.S. Pacific Northwest and Rockies. Pine Brook controls the venture, known as Comet Ridge Resources LLC. Last summer, as oil began trading at around $140 and analysts were predicting a $200 breakthrough, the energy veteran was not convinced. "There were a lot of psychological factors driving up the market," he explains. Not least among them was the perception of unlimited growth in China and India, "where everyone was going to have a car." But there were indicators of a looming crash, he says, including what he called the "demand destruction" -- showing the drop in the number of miles driven in the U.S. as gasoline prices soared. With oil prices now around $45 a barrel, it's a good time to be investing, McMahon says. Today Pine Brook is gearing to make its contribution to a greener planet, according to McMahon. The firm is talking with management teams to invest in wind energy as well as technology to capture carbon dioxide at the site of coal-fired power plants and natural gas compressors. Its strategy, generally, is to build new businesses, adding debt only once the company reaches scale and generates sustainable cash flow. Although it funds startups, it does not consider itself a venture capital firm, since it does not invest in risky, unproven technology dependent on government subsidy. At 61, McMahon maintains an interest in public policy and public service. Before launching Pine Brook, he was an executive counselor to Rhode Island Gov. Donald Carcieri for four years. As a Cabinet member, he focused on developing the state's workforce and physical infrastructure. In McMahon's opinion, governors and "big city" mayors fill two of the toughest jobs in American government because of the limited resources available for large-scale projects. Still, there are some rewards to the challenges. As he says, "It's at the state and municipal levels that you really touch people's lives." |
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