Platinum Equity, Ares Back Kingswood's Daramic Battery Play

Kingswood Capital Management just closed its acquisition of Daramic — a name you've never heard of that's inside millions of devices you use daily. The Los Angeles-based private equity firm landed the battery separator manufacturer with senior financing from Platinum Equity Capital Partners and Ares Commercial Finance, according to a January 27 announcement that tells you more about where industrial infrastructure bets are headed than the press release admits.

Daramic makes the thin, porous membranes that keep lithium-ion batteries from catching fire. It's unglamorous. It's critical. And it sits right in the middle of the EV supply chain land grab that's quietly reshaping how debt funds think about industrial assets.

The financing structure itself — senior secured debt from two marquee credit shops, one a PE-affiliated lender, the other a publicly traded BDC — signals something worth watching. This wasn't a strategic buyer with balance sheet cash. This wasn't a growth equity check into a software darling. This was leverage deployed into physical manufacturing infrastructure at a moment when that category is supposed to be out of favor.

Daramic operates production facilities across the U.S., Belgium, and China. It's been around since the 1930s. It was previously owned by Polypore International, then Asahi Kasei after a $3.2 billion acquisition in 2015, then carved out again. That's the profile of an asset that's been passed between conglomerates looking to slim down and PE shops looking for operational upside in overlooked industrials. Kingswood's bet is that the EV transition makes this time different.

Battery separators don't store energy. They don't conduct it. They just sit between the anode and cathode, preventing short circuits while letting ions pass through. But without them, lithium-ion batteries are expensive fire hazards. Every EV, grid-scale storage system, and power tool uses them. Demand scales directly with battery production.

Global battery separator demand is projected to grow at a compound annual rate above 15% through 2030, driven almost entirely by electric vehicle adoption. That's not speculative — it's downstream from regulatory mandates in California, the EU, and China that phase out internal combustion engines over the next decade. The Inflation Reduction Act's domestic manufacturing incentives make U.S.-based production even more attractive.

Daramic's geographic footprint matters here. U.S. capacity gives it access to IRA credits and Buy America requirements. European operations align with the EU's push for localized battery supply chains after years of dependence on Asian imports. China exposure keeps it in the world's largest EV market. It's a hedge across three regulatory regimes that all point the same direction.

The company's heritage in traditional lead-acid battery separators — its original business — is less sexy but stabilizes cash flow. Lead-acid isn't growing, but it's not dying either. Backup power, automotive starters, and telecom infrastructure still run on it. That base generates the kind of predictable EBITDA that makes lenders comfortable while the lithium-ion side scales.

Platinum Equity Capital Partners and Ares Commercial Finance co-led the senior financing. Neither disclosed terms, but the partnership itself is revealing. Platinum's credit arm operates as a captive lender within the Platinum Equity ecosystem — it typically finances Platinum's own deals or provides capital to portfolio companies. Ares Commercial Finance, meanwhile, is a publicly traded BDC (ARCC) that reports to the SEC and has $23 billion in assets under management.

When a PE-affiliated lender teams up with a public BDC, it usually means the deal size exceeds what either wants to hold alone, or the risk profile requires shared exposure. It also signals that both see enough upside to commit capital in a senior position — not just equity.

Senior secured debt in a leveraged buyout context typically prices at 350-500 basis points over SOFR for industrial assets, depending on leverage multiples and asset quality. The absence of disclosed leverage metrics in the press release suggests Kingswood isn't advertising the multiple — often a sign the deal stretched into the mid-5x range or higher, which is aggressive for a manufacturing asset but defensible if growth projections hold.

The involvement of two sophisticated credit players also suggests asset-level confidence. BDCs like Ares don't lend into turnarounds or speculative capacity expansions — they lend into cash flows they can model with tight bands. That implies Daramic's existing contracts, customer concentration, and margin profile passed institutional due diligence.

Kingswood Capital Management runs about $4 billion in AUM and focuses on North American industrial and business services buyouts. Its portfolio includes companies in packaging, logistics, and specialty manufacturing — the kind of assets that benefit from supply chain reshoring and industrial policy tailwinds but don't command SaaS multiples. Daramic fits that thesis exactly.

Kingswood didn't buy Daramic to hold it as-is. The PE playbook for an asset like this involves some combination of capacity expansion, operational efficiency gains, and customer contract optimization. The financing structure funds the acquisition, but the real returns come from what happens in the next 24 months.

Here's what's likely already underway or on the roadmap: capacity additions at U.S. facilities to capitalize on IRA incentives and nearshoring demand from domestic battery manufacturers. European operations may see investment to serve the EU's accelerating EV buildout. China assets could be rationalized or spun depending on geopolitical risk appetite, though more likely they're maintained to serve local customers like CATL and BYD.

Margin expansion is the other obvious lever. Battery separator manufacturing is capital-intensive but not labor-intensive — automation, yield improvement, and raw material sourcing efficiency can each move EBITDA margins by 200-300 basis points. Daramic's been through multiple ownership changes, which often means deferred capex and underinvestment in process optimization. A focused PE owner with capital to deploy can capture that delta.

Customer diversification is trickier. The battery supply chain is notoriously concentrated — a handful of cell manufacturers (LG Energy Solution, Samsung SDI, Panasonic, CATL) dominate global production. If Daramic has high customer concentration, that's both a risk and an opportunity. Long-term offtake agreements with Tier 1 customers stabilize revenue but cap pricing power. New entrants and second-tier cell makers offer margin upside but less credit quality.

The press release doesn't name customers, which is standard. But industry data shows that separator suppliers with U.S. and European footprints are actively being courted by battery startups and auto OEMs building captive cell production. Ford's BlueOval Battery Park in Kentucky, GM's Ultium Cells joint ventures, and Volkswagen's PowerCo all need domestic separator supply. Daramic's in the conversation.

Kingswood typically holds assets for 4-6 years. That timeline aligns almost perfectly with the EV adoption S-curve's steep part — 2025-2030 is when EVs go from 10-15% of global auto sales to 40-50%, depending on whose forecast you believe. A separator manufacturer with scaled capacity, strong customer contracts, and margin improvement documented over that window becomes a strategic acquisition target.

Potential buyers in a 2028-2030 exit scenario: a large chemical company looking to verticalize its battery materials portfolio (think BASF, Dow, Eastman Chemical). An Asian conglomerate seeking Western manufacturing footprint to derisk geopolitical supply chain exposure. Or another PE firm running a buy-and-build in battery materials — several are active in the space, rolling up precursor producers, cathode manufacturers, and separator suppliers into scaled platforms.

The Daramic acquisition sits at the intersection of three trends that are reshaping how debt and equity capital flows into physical assets: electrification infrastructure as a secular theme, supply chain localization as a policy driver, and private equity's search for operational value outside of software and services.

Electrification infrastructure isn't just EV charging stations and grid-scale batteries. It's the component layer beneath — separators, electrolytes, copper foil, thermal management systems. These are low-margin, high-volume manufacturing businesses that historically got passed around conglomerates. Now they're getting PE attention because the volume growth is real and the policy support is durable.

Supply chain localization — whether you call it reshoring, friendshoring, or strategic autonomy — has moved from white papers to capex budgets. The U.S. battery supply chain today imports 80%+ of key components from Asia. That's not sustainable under IRA rules or acceptable under DOD supply chain security reviews. Daramic's domestic capacity gives it a seat at that table.

And PE's industrial pivot is underreported. Everyone talks about mega-fund software buyouts and GP-led secondaries. Meanwhile, mid-market industrials are getting attention from firms that used to ignore them. Why? Because operational improvements in a manufacturing business compound over time, and because the exit multiples on strategically critical assets are climbing as corporates wake up to what they sold off over the last decade.

EV adoption could slow. It's happened before — the 2010s were supposed to be the EV decade, and it took until 2020 for meaningful penetration. Charging infrastructure, battery costs, and consumer demand all have to align. If one breaks, separator demand growth stalls. Kingswood's bet assumes the policy support holds and the cost curves continue improving. That's not guaranteed.

Technology risk is real. Solid-state batteries — the next-gen tech everyone talks about — may not need separators in the same form. Companies like QuantumScape and Solid Power are developing ceramic or polymer electrolytes that eliminate the separator entirely. If solid-state scales in the 2028-2030 window, Daramic's asset base faces obsolescence risk. The hedge is that solid-state keeps getting delayed, and lithium-ion keeps improving just enough to maintain dominance.

Customer concentration and pricing power are the other question marks. If Daramic derives 60%+ of revenue from three customers, it's a contract manufacturer, not a differentiated supplier. That limits exit multiples and makes EBITDA growth dependent on volume, not price. The press release offers no visibility into margin trajectory or customer diversity, which is either strategic silence or a flag.

Daramic isn't the first battery materials asset to get PE-backed in the last 18 months. In 2023, EnerVenue raised $515 million in a combination of equity and project finance to scale metal-hydrogen battery production — different tech, similar thesis. Earlier in 2024, Redwood Materials, the battery recycling company, closed a $1 billion debt facility from multiple lenders to build out its U.S. cathode production. The common thread: capital flowing into physical infrastructure that benefits from EV growth and policy tailwinds.

What differentiates Daramic is its maturity. It's not a startup scaling unproven tech. It's an established manufacturer with decades of operational history. That makes it financeable with senior debt at scale, which is why Platinum and Ares were comfortable writing the check. It also means the upside is operational and commercial, not technological — a safer bet, but a narrower return band.

Ascend Elements, another battery materials play, raised $542 million in late 2023 to scale recycled cathode production. That deal pulled in both strategic investors (SK On, Stellantis) and financial sponsors. Daramic's purely financial buyer base suggests Kingswood sees a cleaner exit path without strategic entanglements.

The valuation comps are hard to nail down without disclosed multiples, but recent transactions in industrial battery materials have traded in the 8-12x EBITDA range for assets with strong growth visibility. If Daramic's doing $50-100 million in EBITDA (educated guess based on historical Polypore disclosures and asset scale), the enterprise value likely landed in the $400-800 million range. That puts the deal in upper mid-market territory, which aligns with Kingswood's fund size and typical check.

The press release is silent on Kingswood's operational roadmap, which means the real story unfolds over the next 12-18 months. Watch for capacity expansion announcements, customer contract wins (especially with U.S. battery startups or auto OEMs), and any executive hires from Tier 1 battery suppliers — that's the signal that Kingswood's pushing for market share, not just cost cuts.

Debt refinancing or upsizing is another tell. If the business outperforms and cash flow inflects, Kingswood could tap the ABL market or issue add-on notes to fund growth capex. That would validate the thesis and set up a strong exit. If the debt stays static, it suggests the business is performing to model but not exceeding it.

The regulatory environment matters too. IRA implementation is still rolling out — Treasury guidance on domestic content requirements, battery material sourcing rules, and critical mineral processing credits will determine how much subsidy Daramic can actually capture. Kingswood's returns hinge in part on policy execution, not just operational execution.

And the competitive landscape is shifting. Chinese separator manufacturers (Shanghai Energy, Cangzhou Mingzhu, Xingyuan Materials) dominate global capacity and cost curves. If they gain U.S. market access or circumvent tariffs through third-country production, Daramic's pricing power erodes. Conversely, if trade restrictions tighten, Daramic's domestic footprint becomes even more valuable. Geopolitics is an input variable here, not background noise.

Daramic's separators won't make headlines. They won't disrupt anything. They'll just enable millions of batteries to work safely and efficiently, and that's exactly why this deal matters. The infrastructure layer of the energy transition — the components, materials, and manufacturing capacity that make electrification possible — is where capital is flowing now that the technology layer is mostly proven.

Kingswood's bet is that being a critical, if unglamorous, supplier in a structurally growing market with policy support is a better risk-adjusted return than chasing the next battery chemistry breakthrough. They're probably right. The winners in infrastructure plays aren't the ones who invent the future — they're the ones who make it scalable.

Platinum and Ares lending into the deal tells you that debt markets see it the same way. When two sophisticated credit funds write senior checks into a manufacturing buyout in early 2025, they're expressing a view on where durable cash flows live. Not in software. Not in consumer brands. In the physical stuff that builds the next industrial cycle.

That's the story the press release doesn't tell. But it's the one that matters.