Platinum Equity today announced that it has closed its second fund with $2.75 billion in capital commitments. For those paying close attention, this is about five months later than Platinum originally planned to close the fund, which principal Mark Barnhill attributes to rounding up a few stray cats (my words, not his).
“We held the final close last Friday, but fund-raising was basically done for all intents and purposes by the end of Q1,” Barnhill says, in his own words. “It just took a bit longer to get to the official finish line with a couple of LPs, so we waited.”
Platinum originally began pre-marketing the fund in late 2006 with a $1.5 billion target, which was twice the size of its first third-party fund raised in 2004 (it had previously used the personal fortunes of founder Tom Gores). The obvious question, therefore is why it raised $2.75 billion — particularly in a time of decreased deal activity and volume. It’s a particularly obvious question for me, given how I criticized Warburg Pincus earlier this year for doing something similar.
Barnhill explained that current market conditions prompted Platinum’s decision, rather than contracted it. “We focus on operationally underperforming and undermanaged businesses in need of operational capabilities on the ground to facilitate turnaround,” Barnhill explains. “From that perspective, it’s a more target-rich environment than it was when we began fund-raising… We’re willing to take on substantial operational risk, but like to minimize financial risk.”
Platinum’s second fund is already around 30% deployed into five portfolio companies: Covad Communications Group, 3B The Fiberglass Co., Tecumsah Power Co., Wheel Pros Inc. and Ryerson Inc. (a cross-investment with Platinum’s first fund).
Citigroup served as placement agent.