Wellspring Capital explores secondary for several assets, including SupplyOne

Wellspring Capital is running a process to move several assets out of an older fund and into a continuation pool for more time and capital to grow the businesses, sources told Buyouts.

The GP-led deal is among a slew of transactions that are helping to drive secondaries volume going into the second half, although GP-led deals especially are contending with pricing discrepancies and buyer selectivity, with only high-quality assets transacting.

GP-led deals, which once dominated volume, have taken a back seat to LP portfolio sales, which represented the majority of transactions in the first half of the year, according to volume surveys from Evercore and Jefferies.

Still, GPs continue to look for ways to both extend holds over certain assets and deliver liquidity back to limited partners in older funds who want to see more exits. As M&A activity has slowed amid higher interest rates and tight credit markets, exits have also dwindled, leading to a slowing of distribution activity in LP portfolios.

Wellspring’s deal includes concentration around one large asset, SupplyOne, as well as a few smaller ones, two sources said. It’s not clear what else makes up the sale. The total deal could be valued at up to $950 million, one of the sources said, though other sources said it could be smaller.

Wellspring is working with Campbell Lutyens on the process.

Wellspring acquired SupplyOne in 2018 through its sixth fund, which closed on about $1.4 billion the same year. The company makes a variety of packaging supplies, equipment, safety products and janitorial supplies.

The exact structure of the deal is not clear. Generally, LPs in older funds have the chance to cash out of their stakes in the assets, roll their interests into the continuation fund, or do a little of both.

Often, in today’s market, LPs can roll their interests on essentially the same terms they had in the original fund, known as a status quo option. Around 35 percent of continuation fund transactions in the first half offered LPs a status quo option, compared to around 10 percent last year, Jefferies said.

“This shift can largely be attributed to sponsors and advisers incorporating feedback from LPs desiring enhanced roll-over options, in addition to recent guidance from ILPA,” Jefferies said. Despite the LP friendlier options, a majority of fund investors (around 80 percent) are choosing to cash out and take liquidity in such deals, the survey said.

Wellspring and its predecessor entities were formed in 1995 by Greg Feldman and Martin Davis. Feldman retired last year, though he continues to own the management company along with William Dawson, according to Wellspring’s Form ADV.

Day-to-day, the firm is led by Alexander Carles and John Morningstar, co-presidents, and managing partner Matthew Harrison, according to the website. Wellspring is back in  the market with its seventh fund, according to a Form ADV filed in April.