Sterling Partners Jumps On Stage With School Of Rock

Target: Paul Green School of Rock

Sponsor: Sterling Partners

Deal Value: $10 Million

For those about to rock, Sterling Partners salutes you. The firm’s recent growth investment in The Paul Green School of Rock Music LLC will help the company bring “the gift of rock” to children all over the country, according to company founder Paul Green.

The majority-stake investment is valued at $10 million, according to a regulatory filing. Equity capital for the deal comes from Sterling Partners’s SVP Funds, its family of growth funds that make initial investments of between $5 million and $25 million. Founder Paul Green co-invested with Sterling Partners in the deal and several of the company’s angel investors rolled over their stakes.

The Englewood Cliffs, N.J.-based company is an operator and franchiser of training schools for aspiring pint-sized musicians. Founded in 1998, Paul Green School of Rock Music requires its students to form bands and perform, which is a highly effective method for motivating students, according to CEO Matt Ross.

The school was the star of a documentary called “Rock School” and calls itself the “apparent inspiration” for the hit comedy, “School of Rock,” starring Jack Black. As attention for the school grew, Paul Green School of Rock Music began to franchise the brand, growing from eight schools in 2005 to its current 49. Until now, the business has existed with capital from angel investors, and its revenues have tripled in the past three years, reaching roughly $10 million in 2008.

That’s where Sterling Partners enters the fold. With plans for 40 more schools in the works, the company decided it needed a financial backer with operational know-how to help it scale the business, build a proper management team, define best practices, improve training and services, find franchise partners and clarify its brand position, Ross said.

Sterling Partners was a top choice for the company because of its success with Sylvan Learning Systems, a tutoring school the firm purchased in 1991, exited through IPO in 2003, and then purchased again in 2007 when it bought Educate Inc., its parent company. Other education plays for Sterling Partners include Smarterville, a provider of Hooked on Phonics products, and Chauncey Group, a certification and licensing exam provider.

Paul Green School of Rock Music and Sylvan Learning have similar back office operations and franchise business models, Ross said. Even though “rock lessons” are considered to be discretionary spending by many families, Ross maintained that the company can continue to grow in a recession. “People are predisposed to invest in their kids,” he said, likening the school’s classes to more traditional extracurricular activities like sports. He admitted that the business could lose some business during a slow economy, but said that’s a reason to improve the company’s service. Ross said 99 percent of the school’s customers would recommend its lessons to others, according to a recent survey taken by the school.

Shoshana Vernick, a principal at Sterling Partners, said the firm believes Paul Green School of Rock could increase its locations by tenfold in the United States. Sterling Partners will prioritize the growth of the company’s U.S. platform, with plans to eventually open schools internationally.