Wellspring employs a disciplined screening process developed over its 23-year history to identify fundamentally sound companies that have clearly defined opportunities for earnings growth and value creation. Potential investments have strong brand identity or market position; the likelihood for improved productivity or cost reductions through reorganizing or redeploying capital into core businesses; and the capability of generating a recurring revenue stream and stable, predictable cash flow with long-term growth. Critical to this strategy is to target companies with a narrow set of addressable issues that represent opportunities if accompanied by the appropriate resources and a sound business plan to effect change.
MODERATE USE OF LEVERAGE
Core to Wellspring’s investment strategy is the principle that investment returns are maximized primarily from growth in profitability and secondarily from the use of financial leverage. When evaluating acquisition-financing alternatives, Wellspring works with management teams to determine the appropriate amount of leverage based upon the financial dynamics of the industry, the company and the financial markets, as well as the nature, extent and timing of expected improvements in profitability and cash flow. The Partners have cultivated a group of non-traditional financing relationships with institutions with whom the Firm has worked with over many years. Employing moderate leverage from these relationship lenders provides management with financial flexibility and the ability to weather industry cycles.
CONSISTENT EXECUTIONAL APPROACH POST-ACQUISITION
A central tenet of each Wellspring investment is the upfront strategic planning and continuous evaluation of the “Wellspring Game Plan,” which is the path for value creation through strategic and operational improvements. Throughout our entire ownership, Wellspring works closely with management and its network of industry resources to: (a) prioritize major opportunities for change initiatives; and (b) perform a realistic “gap analysis” on the key hurdles to success. In each of Wellspring’s funds, The Firm has had success driving value applying consistent executional levers such as marketing investment, commercial training, procurement savings, operations improvements and accretive M&A. Wellspring has executed over 60 add-on acquisitions during our 23-year history, including large-scale transformational M&A as well as strategic tuck-ins.
Wellspring’s track record of significant value creation is demonstrated by (a) average EBITDA growth of over ~90% across realized portfolio investments; and (b) consistent multiple expansion upon exit across realized investments.
SUPPORT MANAGEMENT IN EXECUTING ITS STRATEGY
Wellspring strongly believes that the value of a company rests upon the strength of its management team and employees. Our most valuable asset is our reputation for reliability, integrity and straightforwardness and we have achieved the greatest success when our management teams are aligned with the same principles. Wellspring is a partner and active director on the board; however, responsibility for day-to-day operations and decision-making rests solely with senior management. By focusing our attention on action plans that have the biggest opportunities to create value, Wellspring limits distraction and provides a valuable resource for financial, strategic and operational support.