Invest in quality business franchises. The firm seeks to invest in companies with strong business franchises where there is an opportunity for significant improvement in profitability and cash flow. Ideally, potential investments have strong brand identity or market position; the likelihood for improved productivity or cost reductions through restructuring, reorganizing or redeploying capital into core businesses; and are capable of generating a recurring revenue stream and relatively stable and predictable cash flow with the potential for long-term growth.
Use moderate leverage in financing acquisitions. Wellspring is committed to the principle that investment returns are maximized primarily from growth in profitability and only 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.
Support management in executing its strategy. In addition to representation on the board of directors, Wellspring actively works with management to unlock a company’s potential by providing ongoing financial, strategic and operational support. At the same time, Wellspring believes that responsibility for day-to-day operations and decision-making must rest solely with senior management. Typically, Wellspring will work with senior management in:
- Recruiting key senior executives and seasoned board members
- Rationalizing/divesting non-core assets and redeploying capital into core operations
- Raising additional capital to pursue acquisition or growth opportunities or to complete
a balance sheet refinancing or recapitalization
- Initiating strategic marketing enhancements or redirections
- Introducing strategic and joint venture partners
- Identifying, evaluating and negotiating strategic add-on acquisitions
- Evaluating and executing the optimal exit strategy, including timing