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Buyouts Snapshot: Texas firm Sterling Group raises $1.25 bln for Fund IV in three months

Sterling Group, the Houston-based middle-market firm, took about three months of formal fundraising to raise the largest buyout pool in its history, with $1.25 billion in commitments for Sterling Group Partners IV.

Partner Kevin Garland said Sterling Group was able to raise Fund IV quickly because of its team effort to stay in touch with LPs.

“We did a lot of preparation,” he said. “Our past returns have been strong. We had a set of existing LPs and we were pleased to have them back. And we brought in a few new investors.”

Sterling Group was fortunate to win a berth among the group of sought-after funds that draw more demand from LPs than supply nowadays, Garland said.

The vintage 2010 Sterling Group Partners III generated a 23.5 percent IRR as of December 31 for the Wisconsin Investment Board, according to performance data compiled by Bison. Other LPs in Fund III include Canada Pension Plan Investment Board and Sacramento Private Equity Partners, an account for the California Public Employees’ Retirement System managed by Oak Hill Capital Partners.

The team for Fund IV remains the same as Fund III, with six partners: Garland, Gregory ElliottJohn HawkinsBrian HenryGary Rosenthal and Kent Wallace.

With $430 million more than the $820 million raised in Fund III, Sterling’s $1.25 billion Fund IV will keep deals about the same size, but it may end up closing more platform acquisitions in the newer fund. It will also have additional capital to support its portfolio companies with acquisitions or other transactions, a spokeswoman for the firm said.

Sterling Group typically targets companies with greater than $15 million in EBITDA in the manufacturing, distribution and industrial service sectors. It takes aim at corporate carve-outs, family-owned businesses, sponsor-backed companies and complicated transactions, according to the firm’s website.

Among the firm’s recent deals, Safe Fleet, an Indiana-based maker of transit bus mirrors, made its fifth acquisition in the last 18 months with the carve-out of the mirror-making unit of Hadley for an undisclosed sum. The deal was announced on July 1.

In May, Sterling Group completed the sale of B&G Crane Service to NCSG Crane & Heavy Haul Corp for an undisclosed sum. Also in May, it closed the acquisition of Process Barron from the founding family and management, who reinvested in the company as part of the deal. Financial terms were not disclosed.

All told, Sterling Group has closed 46 platform acquisitions and other deals for a total value of more than $10 billion since the firm was founded in 1982.

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