Sterling Investment Partners Is Prepping Third Fund

Sterling Investment Partners is in preliminary discussions with limited partners about raising its third fund, two sources told Buyouts. The firm will start raising the fund in the first half of the year and seek $500 million to $600 million, one of the sources said.

The firm is working with Park Hill Group LLC, the placement agency owned by The Blackstone Group, instead of the placement group at Credit Suisse, which helped it raise its previous fund, the second source said.

Sterling Investment executives were concerned about working with Credit Suisse’s fundraising group because of turnover there, this source said. Last year, co-head Ray Cosman retired, then joined Macquarie Group, where he is vice-chairman of infrastructure and real assets in North America. And earlier this year Jessica Brennan, who was a managing director in Credit Suisse’s fundraising group, left to join The Carlyle Group’s investor relations team. Executives with Park Hill and Credit Suisse did not respond to requests for comment.

Westport, Conn.-based Sterling Investment targets companies generating EBITDA of at least $10 million and revenues of at least $50 million in a variety of industries, including niche manufacturing, transportation and logistics and technology.

The fundraise is a long time coming for the firm. Sterling Investment raised $545 million in commitments for its second fund, closed way back in 2005. But the firm is in a bit of a dilemma, one source said, because it still has enough capital from Fund II to back about three new deals. Earlier this year, investors granted Sterling Investment a year-long extension on the fund’s investment period. That said, this source said the firm shouldn’t have much trouble raising fund three because it has a “very good track record” and a stable team.

An executive with Sterling Investment did not reply to requests for comment.