Platinum eyes $1 bln for debut small-cap fund

  • Small cap fund to target companies with $450 mln of revenue and under
  • Small-cap team has four deal leads, including former Gores Group exec
  • GP offering $30 mln GP commitment

Platinum Equity launched its debut small-cap fund targeting $1 billion to invest in companies with less than $450 million of revenue, sources told Buyouts.

Deals below $450 million of revenue and $45 million of Ebitda will be part of the small-cap fund, according to a fund document.

The firm targets investments in underperforming or undermanaged companies and looks at corporate divestitures, special situations, public-to-private transactions and restructurings.

Platinum Equity Small Cap Fund is offering to charge a 2 percent management fee and 20 percent carried-interest rate; a six-year investment period and a 10-year fund term with two one-year extensions, fund information seen by Buyouts shows.

The GP is offering to commit $30 million to the fund, according to a marketing document. Daniel Whelan, a principal at Platinum, did not respond to a request for contact.

The small-cap team is led by Nick Fries, Fernando Goni, Jason Leach and Joe Onwuegbusi. Fries, a senior vice president, worked at Platinum since 2007. Leach, a principal, worked at Platinum since 2011, prior to which he was at Sun Capital Partners from 2003 to 2009, his LinkedIn profile said. SVP Onwuegbusi worked at Platinum since 2006, his profile said.

Interestingly, Goni joined Platinum in November 2017 from Gores Group, where he’d worked since 2005, according to his LinkedIn profile. Gores has seen several executive departures in recent years and has decided to move forward on a deal-by-deal basis without a new commingled fund.

Platinum has raised four flagship funds, including Fund IV, which closed on $6.5 billion last year. Platinum raised $3.75 billion for the third fund in 2013. Fund II collected $2.75 billion in 2008, and the debut fund closed on $700 million in 2004.

The first three funds each had exposure to small-cap investments of $450 million and less, the marketing document shows. About 10 percent of Fund III is invested in small-cap deals, the document said. Fund IV had no such exposure to such investments as of Sept. 30, 2017, the document said.

Platinum, Los Angeles, was formed in 1995 by billionaire Tom Gores. His brother, Alec Gores, formed Gores Group.

Platinums funds have produced a consistently strong track record. Fund IV, still within its j-curve period, was producing a 29.2 percent net IRR and a 1.3x gross multiple as of the same date, the document said.

Fund III was generating a 41.3 percent net internal rate of return as of Sept. 30, 2017, according to performance information in the fundraising document. Fund II was generating a 14.1 percent net IRR and the debut fund was producing a 61.9 percent net IRR, the document said.

Action Item: Check out Platinum’s Form ADV here:

Photo of Tom Gores sourced from Platinum’s website