Wellspring closes in on Fund V

The firm plans to hold a final close in October for its fifth buyout fund, which is targeting $1.3bn.

Wellspring Capital Partners has collected at least $900 million for its fifth buyout fund, which is targeting $1.3 billion for US mid-market investments.

The firm expects to have a final close on the fund in October, according to a person with knowledge of the fundraising and documents from the Connecticut Investment Advisory Council. Connecticut was considering making a commitment to the fund this week.

Wellspring, founded in 1995 by Greg Feldman and the late Martin Davis, will charge a 2 percent management fee on commitments up to $1 billion, and 1.25 percent for commitments over $1 billion for the first five years of the fund’s term. After the fee will drop to 1 percent until the investment period ends, and will then equal 1 percent per annum of net invested capital.

The firm will give 100 percent of the transaction fee to LPs to pay down the management fee.

Wellspring will focus on mid-market US companies in the consumer products, manufacturing, retail, distribution and business and consumer services industries. The firm took restaurant chain Dave & Buster’s private in 2006 for $375 million, and sold it in May to Oak Hill Capital Partners for $570 million.

Wellspring also partnered with The Blackstone Group in 2008 in a $1.4 billion take-private of Performance Food Group.

Fund V, if it hits its target, would be Wellspring’s largest. The firm expects to target companies ranging in value from $150 million to $750 million and more, according to Connecticut pension documents.

Fund IV, which closed on $1 billion in 2006, was generating a total value multiple of 1.04x and a 2 percent internal rate of return, as of 31 March, 2010, according to performance numbers from the Oregon Investment Council, an LP in several Wellspring funds.

As of 31 March, Fund III, which raised $675 million in 2002, was generating a 1.87x total value multiple and 25.5 percent IRR, and Wellspring’s Fund II, which closed in 1999, was generating a 1.47x total value multiple and 20.1 percent IRR, according to Oregon documents.