Platinum Equity targets $1.75bn for second small-cap fund

Platinum Equity, in the market with a sixth flagship buyout fund, rolled out a second dedicated offering for lower mid-market investing.

Unveiled late last year, Platinum Equity Small Cap Fund II is seeking $1.75 billion, Los Angeles City Employees’ Retirement System documents said. The hard-cap ranges from $2 billion-$2.25 billion.

The target, if reached, would make Fund II slightly larger than the debut vehicle, closed in 2018 at $1.5 billion. Platinum declined to comment.

Tough conditions for capital raising are expected to persist in the year ahead. Some $559 billion was raised by North American private equity funds in 2023, down 9 percent from a year earlier, according to Buyouts data, while fund closings declined 17 percent.

Platinum’s small-cap strategy mirrors its flagship counterpart, emphasizing control investing in value-oriented opportunities. As flagships have moved steadily upmarket over time, the firm saw a need to create a new approach to keep a presence in smaller transactions.

As such, the small-cap strategy – like the flagship – acquires underperforming businesses via carve-outs, recaps, special situations, take-privates and other deal types. However, target companies have revenue of up to $650 million and EBITDA of up to $45 million.

Similarly, the small-cap team sources dealflow in North America and Europe on an industry-agnostic basis. Sectors in which Platinum often invests are manufacturing, distribution, transportation and logistics, equipment rental, metals services, media and entertainment, technology and telecommunications.

Recent small-cap platform investments include E&A Scheer, and its subsidiary The Main Rum Company, a premium rum blending specialist acquired from The Riverside Company. The deal was announced in January.

And last summer, the team acquired The HC Companies, a manufacturer of horticultural containers. It was one of 51 buy and sellside transactions completed in total by Platinum in 2023, according to a year-end report.

As of June 2023, Platinum Equity Small Cap Fund I was generating a 1.94x net multiple and a 30.4 percent net IRR, New York City Police Pension Fund reported.

Platinum was founded in 1995 by CEO Tom Gores, a billionaire entrepreneur and owner of the National Basketball Association’s Detroit Pistons. Last year, Jacob Kotzubei and Louis Samson joined Gores in top leadership as co-presidents. They oversee more than 300 professionals globally.

Platinum Equity Capital Partners VI is seeking somewhere between $12 billion and $15 billion, Buyouts reported last May, citing various pension documents. Launched in 2021, the vehicle has to date secured $10.66 billion.