Sterling Partners: Bringing Inspired Growth to the Middle Market

It’s clear as soon as you walk into Sterling Partners’ offices: This is not your typical private equity firm. The windows boast 360 degree views of downtown Chicago. There are no private offices, no plaques with last names of partners engraved outside. Instead, investment professionals plug in wherever they feel most comfortable. On the day we visited, a few had sidled up to standing desks, while another checked email while walking at a treadmill desk; groups gathered to discuss deals in rooms dubbed Beethoven and Picasso.

“Culture is really important to us,” affirms Whitney Krutulis, Director of Business Development. The sleek space, however, isn’t just about creating a comfortable environment for employees. “It’s memorable and makes an impression on the founders of business we are hoping to partner with,” says Krutulis.

Building a Private Equity Brand

In an increasingly competitive environment, Sterling recognizes it’s not just about finding any deal, but rather, the right deal — one where they can bring what they’ve trademarked as “inspired growth.” For Sterling, these are founder-owned and operated middle market companies in industries with positive, long-term trends. They focus on healthcare services, education, and business services.

“The biggest challenge is, in many ways, the same as the ultimate goal — to see every deal that fits our criteria,” says Krutulis. To find those deals in a more consistent and predictable way, Krutulis helped to formalize Sterling’s emerging business development function a little over a year ago. The firm had recently completed a rebrand, including the new office, a redesigned website, and their first “purpose” book. “The focus was less about defining who we were,” says Krutulis. “We’ve always had a strong culture and identity. It was more about communicating it.”

In a market defined by a supply-demand imbalance, Krutulis’ job is to help Sterling reach the broadest audience possible. Even though they focus on three key sectors, it’s impossible to know who is going to have that one deal they want. Once they’ve identified a great company for their portfolio, that’s when the brand kicks in. “If you bring a potential partner here, they get a much better sense of who we are and that we are different,” says Krutulis. Finding a cultural fit is particularly important for Sterling, since the founders of their portfolio companies almost always stay invested post-transaction.

Part of the Family

Krutulis compares the companies they partner with to a marriage: “They become part of the Sterling family.” Sterling found one of the newest additions to the family on Axial late last year. The firm completed an investment in Surgical Solutions, a Kentucky-based provider of support and equipment for surgical procedures. For the first time, Surgical Solutions was looking for institutional capital and expertise to help them scale.

“The founders had already built a great business providing a unique, niche service, but they knew they needed a partner to help take the business to the next level. We recognized the staying power of the company’s services, which deliver quality and value to patients at a lower cost to the system,” says Krutulis.

Without Axial, Krutulis says, Sterling would probably never have seen this deal. It was represented by an intermediary they had not met before — a California-based banker who brought Surgical Solutions to market on Axial.

“Surgical Solutions meets the pressing need of hospital administrators to find new ways to save money while promoting ‘physician-friendly’ facilities and delivering the highest quality of care. The company drives efficiency, as well as professional – doctors and nurses – and patient satisfaction,” said Kim Vender Moffat, Principal at Sterling Partners. “We partnered with the founder and his team to take what they had built and help them further scale that service while not losing focus of the company’s founding mission and service orientation.”

The Human Side of Capital

One of the most unique advantages Sterling offers their portfolio companies is access to their Human Capital expertise. “We’ve always been operators and, of course, we bring financial capital,” says Krutulis. “But we consistently find that a strong management team and board of directors are critical to a company’s success.” From its earliest days, Sterling’s founders believed in the importance of talent, from both a management and advisory perspective, and that focus on talent carries over to the companies they partner with today.

Krutulis explains that because they typically partner with founder-owners, there is often an opportunity to build out management. “It’s not that the founders don’t have great teams in place, rather, there is an opportunity to scale the business by hiring additional executives who can take it to the next level,” she says. “We want to build a management team for where the company will be in the coming years; in other words, we ‘over-hire.’”

Sterling’s Human Capital team gets involved early on in the deal process, giving them an opportunity to get to know the founders and what’s important to them. From there, the Human Capital team identifies if there is a natural role to fill, asking these founder-owners, if they could have anyone sit across the table from them, who would it be? Then Sterling goes and gets that person.

This is especially important when a founder-owner is looking to take a step back, perhaps moving from a day-to-day operational role to acting in an advisory capacity or board position. Krutulis emphasizes, “We understand that legacy is incredibly important, and our team works with the founder to find the right successor to run the business day-to-day.”