Sterling Partners to Put $200M in Education Deals

Chicago-based firm closes first sector-focused fund

With an eye toward leading growth-oriented businesses in the academic space, Chicago-based private equity firm Sterling Partners recently announced the closing of its first sector-focused fund at $200M. The Education Opportunity Fund will target portfolio companies serving the higher-education market in addition to technology-relevant businesses.

The fund has a single limited partner, USA Funds, a nonprofit corporation that works to create a more purposeful pathway for American students, starting with their entrance to college, continuing through their graduation, and leading to successful careers and lives afterwards. USA Funds capitalized the entire $200M of commitments.

Jason Rosenberg, managing director at Sterling, likens the relationship between his firm and USA Funds to a managed account. The two sides were in discussion about creating an education-focused investment vehicle for a short time, between four and six months. According to Rosenberg, managers will target between eight and 12 deals during the life cycle of the fund.

“They are a great partner for us,” he says. “There is a free exchange of ideas.”

Sterling will rely upon USA Funds’ 55 years of expertise and networking within the education space, having provided support to more than 22 million students and parents. That’s not to say Sterling doesn’t know the sector in its own right. The firm has a long history of investing in education, dating back to its founding in 1983. It currently lists 11 education-based portfolio companies on its website, including School of Rock, the largest afterschool provider in the music education industry, according to the firm. Sterling has locations in Chicago, Baltimore, and Miami, typically investing in small and midmarket companies.

The new fund will put capital to work in portfolio companies that enable the globalization of education, use advanced analytics to improve services, and implement technology to improve both the learning and teaching experiences.

In addition to technology-enabled businesses, managers of the Education Opportunity Fund will focus on partnering with colleges and universities, as well as companies that promote workforce opportunities.

Rosenberg says the firm will use the same playbook in making deals from this new fund as with its larger funds. That includes bringing to bear its expertise in human capital and providing overall strategy, direction, and all-around good governance. Sterling will look to invest about $20M in equity per deal, occasionally bumping that up to $25M.

While Sterling’s larger funds have invested in the education space, as well as in healthcare and business services, this is the first vehicle to focus solely on a single sector. As to why the firm chose to focus on education and what attracted the firm to USA Funds, Rosenberg says: “Education will go through big changes in the future, and we have great alignment with USA Funds.”