Neuberger, Lexington co-lead Wellspring continuation fund process

Neuberger Berman and Lexington Partners have emerged as lead investors on a deal run by Wellspring Capital to extend its hold over several assets, including SupplyOne, sources told affiliate publication Buyouts.

The GP-led deal is among a handful that are moving toward close in the last months of 2023. GP-led activity has been slower this year than previous years as buyers look for only the highest quality assets from well-known GPs. Pricing has also been tricky on GP-leds as LPs expect target assets to trade at robust pricing, while buyers may be looking for discounts.

The secondaries market had about $50 billion of total activity, with GP-led deals representing about 35 percent in the first half, according to PJT Park Hill’s volume report.

Wellspring’s deal includes SupplyOne, which makes packaging supplies, equipment, safety products and janitorial supplies, and represents around 50 percent of the total deal, sources said. Wellspring acquired SupplyOne in 2018 through its sixth fund, which closed on about $1.4 billion the same year.

The continuation fund deal also includes two other assets, the identities of which are unclear. The total deal could be valued at around $900 million, one of the sources said. The firm is understood to be working with Campbell Lutyens on the transaction.

The deal is still live in the market and is moving toward closing, sources said. No one from Wellspring responded to a comment request Tuesday.

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.

Other GP-led processes that continue to move through the market include a transaction run by K1 Investment Management, which wants to move three assets out of an older fund and into a continuation pool, Buyouts previously reported.

GenNx360 Capital is running a process to extend its hold over Precision Aviation Group in a deal led by Neuberger Berman, while Leonard Green is running a four-asset continuation fund deal led by AlpInvest Partners.