Diversification is the word at Platinum Equity, which plans to expand into credit. First, though, Platinum expects to get rolling with its latest buyout fund.
The Los Angeles shop founded by Tom Gores expects to come to market with its fifth flagship this year, said Mark Barnhill, a Platinum partner and spokesman.
Platinum will target at least $6.5 billion for Fund V but that could jump to as much as $8 billion, he said.
“Our expectation is that Fund V will increase in size and $8 billion is a reasonable expectation,” Barnhill said. Platinum’s fourth flagship fund closed on $6.5 billion in 2017.
The firm specializes in complex carveouts of companies owned by Fortune 500 companies. It targets sectors including manufacturing, distribution, technology and media and entertainment.
The firm this month acquired PLI Card Marketing Solutions. It also sold Verra Mobility to Gores Group in June for $2.4 billion.
Platinum is looking to develop different investment products and has been talking to its LPs about its “proper growth path” for the past decade, Barnhill said.
In December, Dyal Capital Partners, part of Neuberger Berman, invested in Platinum, buying a passive minority stake. How much Dyal paid is unclear, but the stake is bigger than 10 percent, a source said.
Dyal’s investment did not prompt Platinum’s expansion plans, Barnhill said.
“We embarked on a diversification path and the Dyal deal was the outgrowth of that,” he said.
One step in Platinum’s multistrategy is small-cap investing. In addition to buyouts, Platinum is looking to invest in companies with revenue up to $450 million or Ebitda up to $45 million.
Last week, Platinum closed its debut small-cap fund on $1.5 billion. Platinum Equity Small Cap Fund will pursue the same type of operations-focused investments as the firm’s flagship funds.
A credit fund is another step. Platinum said July 17 that Michael Fabiano is joining the buyout shop in January, where he will lead the formation of a credit-investing division.
Fabiano is on gardening leave from GSO Capital Partners, where he is listed as a managing director. Platinum plans to launch the credit fund once Fabiano officially joins the buyout shop.
The firm will be looking to hire a team to support Fabiano, including investment professionals and back-office support, Barnhill said.
“We expect the investment team will evolve after [Fabiano] gets on board,” Barnhill said.
Platinum doesn’t plan to come to market with its credit pool for another 12 to 18 months, after the launch of its flagship fund, Barnhill said.
How much the firm will seek for the credit pool is unclear. Platinum has already done some credit investing with its core buyout funds, Barnhill said.
Platinum is considering many different type of credit-investment vehicles, including private lending, distressed-for-control and public credit, he said.
The firm may look to play in the same realm as traditional players like Ares Management, Blackstone Group and Oaktree Capital Group or it could seek to partner with these firms, he said.
“We’ll start on the private-lending side and go from there,” he said.
Action Item: For more information, contact Barnhill at (310)-228-9514
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