By Joshua Franklin
(Reuters) - Buyout firm KKR & Co LP <KKR.N> said on Friday it had agreed to buy industrial tool components manufacturer Hyperion from Sweden's Sandvik <SAND.ST>, its first acquisition of a relatively small manufacturing company.
The deal, which Sandvik said in a statement was worth 4 billion Swedish crowns (£352 million), signals a shift by KKR from its past focus on larger deals.
"We like the industry and we think this is a neat company with lots of additional potential," Pete Stavros, the head of KKR's industrials investment team, said in a telephone interview.
KKR said the deal was being funded through its $13.9 billion Americas XII Fund, which finished fundraising earlier this year.
Institutional and wealthy individuals have been increasingly eager to invest with private equity firms, which buy companies to sell a few years later for higher returns than available in public financial markets.
Buyout funds raised $66 billion in the third quarter, according to research firm Preqin, up 47 percent from the year-ago period. This cash influx into a growing number of private equity firms means the industry has an estimated $954 billion to invest.
KKR's move to look at the smaller-sized, or middle-market, businesses opens the door for more deal opportunities, Stavros said.
"If you think about someone who, on my team, covers the building products sector, which is a very fragmented space, there's just so much more transaction activity in the middle market," he said. "This'll give that person a lot more opportunities to look at."
Fair Lawn, New Jersey-based Hyperion has around 1,400 employees. KKR will continue allowing staff to have a stake in the companies it invests in, a policy it believes helps to improve profitability.
(Reporting by Joshua Franklin; Editing by Chizu Nomiyama and Richard Chang)