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The Sterling Group Raises $820 Million for Fund III

The Sterling Group has closed its third fund with $820 million in capital commitments. The Houston-based firm focuses on mid-market private equity opportunities, and had closed its prior fund with $470 million in 2005.


The Sterling Group, L.P. a Houston based middle-market private equity firm focused on operational value creation, today announced the final closing of Sterling Group Partners III, L.P. (Fund III) at $820 million. Fund III, raised in 10 months and oversubscribed, closed significantly above its $600 million target. It is the successor to Sterling Group Partners II, L.P. (Fund II), a $470 million private equity fund organized in 2005. With the close of Fund III, Sterling has approximately $1.3 billion in committed capital under management.

As with previous funds, the objective of Fund III is to create superior returns by acquiring companies with significant opportunities to drive strategic and operational improvements in partnership with management. Fund III will focus on middle-market businesses in manufacturing, industrial service and distribution, typically with $100 million to $500 million in total enterprise value. The Fund will focus primarily on corporate carve outs, buy and builds, family-owned businesses and other complicated sale processes.

“We are very pleased to close Fund III. Despite a challenging fundraising environment, there was significant investor interest,” said Sterling partner Gary Rosenthal. “Substantially exceeding our original target in a relatively short timeframe reflects our investors’ confidence in our disciplined value creation strategy, which has provided superior investment performance for nearly 30 years. We’d like to thank our new and returning limited partners for their commitment to Fund III and to The Sterling Group.”

Founded in 1982, The Sterling Group is one of the oldest private equity firms in the country. The firm has delivered outstanding returns throughout its history. Since inception, Sterling has realized a return of 4.4x invested capital. The firm successfully operated without a dedicated fund for the first 18 years. Fund I (raised in 2001) and Fund II (raised in 2005) have returned in aggregate 2.9x invested capital with an IRR of 47.7% on realized investments.

“Sterling is committed to being a top tier operationally-focused private equity firm, delivering superior returns to our investors and creating long term value,” said Sterling partner Kevin Garland. “Our strategy works across market cycles, and now is a particularly attractive environment for Sterling to acquire businesses. As we invest Fund III, we will adhere to our proven approach of acquiring underperforming businesses at attractive values and implementing, with management, a strategic, hands-on approach that helps these companies realize their full potential.

Limited partners in Fund III include a diverse group of public and private pension plans, fund-of-funds, financial institutions, foundations and individuals. Significant investors include Allianz Capital Partners, Inc., Canada Pension Plan Investment Board (CPPIB), Constitution Capital Partners, the Credit Suisse Customized Fund Investment Group, DuPont Capital Management, Hancock Capital Management, New York State Teachers’ Retirement System, RCP Advisors and the State of Wisconsin Investment Board.

“We are very impressed with The Sterling Group’s successful operational approach,” said John J. Guinee, Managing Partner, Constitution Capital Partners. “Sterling has been quietly building great companies for close to 30 years, and has generated truly impressive returns. We are pleased and proud to be an investor in their fund.”

Lazard Freres acted as Sterling’s exclusive global placement agent for Fund III. Paul, Weiss, Rifkind, Wharton and Garrison LLP acted as legal counsel.

About The Sterling Group, L.P.

Founded in 1982, The Sterling Group is a Houston based private equity firm targeting controlling interests in basic manufacturing, industrial services, and distribution companies. Sterling emphasizes strategic and operational value creation in partnership with management. Typical enterprise values range from $100 to $500 million. Over its nearly 30 year history, Sterling has acquired 36 platform companies and numerous add-on acquisitions aggregating approximately $8.6 billion in transaction value. Currently, Sterling has $1.3 billion of committed capital under management. For more information, please visit: