Sterling's Scruggs Buy Signals Major Push into Water Infrastructure

DALLAS, TX – April 24, 2026 – The Sterling Group Foundation Fund, a private equity firm known for its operational focus, today announced its acquisition of The Scruggs Companies, a key provider of products and services for municipal water systems. The deal places a spotlight on the increasing role of private capital in maintaining and upgrading America's critical, and often aging, water infrastructure.

Headquartered in Houston, Scruggs has built a robust presence across Texas, Oklahoma, Kansas, Missouri, and Arkansas. The company operates a dual-pronged business model, distributing essential flow-control products like valves and actuators while also providing the hands-on repair and maintenance services that keep municipal water and wastewater systems functioning. This acquisition moves Scruggs from the portfolio of Rox Capital Partners to Sterling's Foundation Fund, which plans to accelerate the company's growth.

A Rising Tide of Private Investment

The acquisition arrives at a critical juncture for U.S. infrastructure. The nation's water and wastewater systems, many of which were built decades ago, are facing immense pressure from age, population growth, and changing environmental conditions. Industry analysis projects the U.S. water infrastructure market to grow from approximately $120 billion in 2024 to nearly $180 billion by 2032. This growth is not just a matter of expansion but of necessity.

Nowhere is this need more apparent than in the Southern United States, which accounts for over a third of the national market. States like Texas, a core territory for Scruggs, are experiencing rapid population and industrial growth, placing immense strain on existing water resources. Projections indicate that Texas alone may require over $150 billion in water infrastructure investment over the next five decades to meet demand and combat shortages. The largest segment of this market is wastewater infrastructure, with over 16,000 treatment plants and more than a million miles of sewer lines requiring modernization.

This vast, non-discretionary need for upgrades creates a stable and attractive environment for investors. Private equity firms, in particular, are increasingly drawn to essential services for their predictable demand and recession-resistant characteristics. The Sterling Group's move is emblematic of a broader trend where private capital and operational expertise are being deployed to address public infrastructure deficits that government funding alone often cannot cover.

Sterling's Blueprint for Growth

For The Sterling Group, a firm founded in 1982 with approximately $9.0 billion in assets under management, the acquisition of Scruggs fits a well-established playbook. The firm's Foundation Fund specifically targets lower middle market companies in sectors like manufacturing, distribution, and industrial services. Its stated mission is to "set the foundation" for growth by applying deep operational capabilities.

This strategy is visible across its diverse portfolio. The Foundation Fund's other investments include platforms built around tire and auto service (Premier Tire and Service), organic waste processing (Compost 360), commercial landscaping (Russell Landscaping Group), and overhead door services (OGD Overhead Garage Door). The common thread is the focus on essential, often fragmented industries where strategic investment and operational improvements can create a scaled, market-leading enterprise.

The plan for Scruggs follows this blueprint. In the announcement, Luke Bateman, Managing Director of the Foundation Fund, articulated a clear vision. "Scruggs has established a strong reputation with customers in the municipal flow control market, and we believe there is meaningful opportunity to accelerate growth through operational improvements and service line expansion," he stated. The goal is not merely to own Scruggs, but to partner with its team to "build a scaled water infrastructure solutions platform."

Scruggs' Next Chapter

Scruggs is not a stagnant company awaiting a turnaround. Under its previous ownership by Rox Capital Partners, the company was already on a strategic growth trajectory. This is a key factor that likely made it an attractive platform for Sterling. In recent years, Scruggs has actively expanded its footprint and capabilities through its own acquisitions.

In early 2025, Scruggs acquired Mid America Valve, a Kansas-based distributor, which significantly broadened its geographic reach into the Midwest and enhanced its product offerings. More recently, in a move that signals a commitment to technological advancement, Scruggs acquired Schuermann Enterprises and Schuermann Analytics. This brought not only a respected product and service provider into the fold but also a data analytics firm focused on optimizing water system performance.

These acquisitions demonstrate a forward-looking strategy to build a comprehensive, multi-dimensional platform that goes beyond simple product distribution. By integrating data-driven insights with its traditional product and repair services, Scruggs has been positioning itself as a more sophisticated partner to its municipal clients. The backing of The Sterling Group is expected to provide the capital and operational horsepower to dramatically accelerate this evolution, potentially leading to further technological integration, service line enhancements, and a more aggressive expansion across the region.

Building a Scaled Platform for a Critical Need

The phrase "building a scaled water infrastructure solutions platform" is central to Sterling's thesis. This strategy, common in private equity, involves using a strong initial company—the "platform"—as a base for subsequent add-on acquisitions and organic growth. Scruggs' existing multi-state presence and its demonstrated ability to integrate acquired companies make it an ideal candidate for such a strategy.

For municipalities and their residents, the implications could be significant. A larger, more efficient, and technologically advanced service provider like the one Sterling aims to build could offer a more comprehensive suite of solutions for managing complex water systems. This could range from supplying next-generation automation components that reduce water loss to providing predictive maintenance analytics that prevent catastrophic failures.

As private capital continues to flow into this essential sector, the partnership between The Sterling Group and Scruggs will be a closely watched example of how private-sector efficiency and strategic vision are applied to one of the public's most fundamental needs. The transaction, advised by BMO Capital Markets Corp., represents more than just a change in ownership; it signifies a strategic investment in the future resilience of water infrastructure across the American heartland.