- Abu Dhabi Investment Council sued Energy & Minerals Group in Delaware, alleging its proposed continuation-fund sale of a ~30% stake in Ascent Resources is conflicted self-dealing that shortchanges LPs.
- ADIC and other investors say EMG’s ~US$5.5bn valuation and two-year payout materially understate value versus estimates above US$7bn including debt.
- EMG has agreed to pause the transaction until at least late February 2026 pending arbitration and a court-supervised arbiter review.
- Hedge fund Mason Capital has floated a higher all-cash alternative and urged a special committee and 45-day go-shop to test the market.
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The ADIC versus EMG dispute highlights intensifying tensions between general partners and limited partners over continuation fund mechanisms—transactions in which a PE manager transfers an asset from one fund it manages into another continuation vehicle, often buying out existing LPs.
Key risk areas in continuation fund deals are valuation mismatch, information asymmetry, incentive misalignment, and process integrity. In this case, ADIC alleges EMG has undervalued Ascent in the CV deal compared to external valuation, misled LPs about exit alternatives, and rushed the approval process—claims EMG disputes but has agreed to stall while the issues are adjudicated.
From EMG’s perspective, the continuation vehicle allows it to increase ownership, reset fees and carry economics, and manage the asset over a longer horizon—potentially generating higher returns if Ascent’s natural gas assets in Ohio’s Utica shale appreciate. But LPs counter that the commercial conditions (e.g., external buyers, IPO pipeline) may not support the higher valuations or exit opportunities being claimed. ADIC’s insistence on launching a formal sale process illustrates a counter-strategy to force market discipline.
Broader market data corroborate that CV deals are now a meaningful share of exit activity: in H1 2025 CVs accounted for approximately 19 % of all PE asset sales, totaling around US$41 billion, a sharp jump versus previous years. These figures explain why LPs are increasingly scrutinizing the structure, governance and fairness of such transactions.
Strategically, firms considering continuation vehicles must ensure robust governance: clear disclosure, fairness opinions based on sound assumptions, independent LP advisory committees (LPACs), and consideration of outside exit options. Failure in these dimensions can lead to litigation, reputational harm, or regulatory intervention.
Open questions remain: whether external buyers or IPO investors were realistically viable; whether EMG’s valuation assumptions were inflated or conservative; what form the arbitrator’s decision will take; and whether this case will set precedents that reshape the market norms for CV deals.
Supporting Notes
- ADIC filed suit in Delaware Court of Chancery on November 26, 2025, against EMG and its affiliates over the proposed sale of Ascent Resources to a sister fund, alleging conflicts of interest and undervaluation.
- EMG’s continuation fund values Ascent at ~US$5.5 billion; several LPs believe including debt, value exceeds US$7 billion.
- The proposed pay‐out for LPs would be made over two years, reducing present value compared to upfront payment.
- EMG has agreed to delay closing the transaction until at least late February 2026, allowing review by a commercial arbiter under court oversight.
- Mason Capital issued an all-cash proposal to acquire all outstanding units at a superior price to EMG’s deal, requesting a Special Committee and a 45-day go-shop period to solicit competing bids.
- Continuation fund or GP‐led secondary deals represent about 19 % of all PE asset sales in H1 2025, totaling about US$41 billion, up from lower volumes in previous years.
- EMG’s recent funds have achieved net returns of 10 % or less; the firm has not raised a new flagship private equity fund since 2019, although closed a US$1.1 billion continuation fund earlier in 2025 for midstream assets.