Partnering with Independent Sponsors
Founded in 1999, WellSpring was (i) a manufacturer and marketer of specialty prescription (“Rx”) pharmaceuticals, (ii) a manufacturer and marketer of OTC drug products, and (iii) a provider of outsourced contract manufacturing (“CMO”) services to pharmaceutical and biotechnology clients in the United States and Canada. WellSpring’s founder developed a strategy to acquire efficacious Rx and OTC products from larger pharmaceutical companies and then leverage WellSpring’s manufacturing capabilities to make the acquired products and capture additional margin.
Background
By 2010, WellSpring’s founder had significantly scaled back his day-to-day involvement and retained an investment bank to sell the business. During the process, an operationally focused independent sponsor with a successful record in healthcare but without permanent capital completed substantial due diligence. The independent sponsor was granted exclusivity because of its healthcare industry credentials and the rapport established with WellSpring’s founder. Needing a lead equity partner for the transaction, the independent sponsor reached out to a select group of private equity firms, including Sentinel. As a result of our experience working with independent sponsors, investment record in healthcare, and strong chemistry established with the management team during initial meetings, Sentinel was selected to lead the transaction.
Opportunity
To partner with an independent sponsor to acquire a proven healthcare platform with multiple avenues for growth
Accomplishments
Structured a Mutually Agreeable Economic Arrangement: Sentinel and the independent sponsor quickly agreed on the financial terms for their respective investments.
Successfully Closed the Transaction: The combination of relationships with key stakeholders, the independent sponsor’s deep industry experience, and the certainty of closing provided by Sentinel led to the timely and successful completion of the transaction.
Worked as Partners to Streamline and Reposition the Business: Sentinel and the independent sponsor worked together with management to sharpen WellSpring’s focus by divesting its Rx portfolio and using the proceeds to drive growth in its OTC and CMO businesses. WellSpring completed three add-on acquisitions for its OTC portfolio and invested in the sales infrastructure of its CMO business to increase its pipeline.
Outcome
During Sentinel’s ownership, WellSpring successfully simplified and refocused its operations to drive growth. WellSpring more than doubled the revenues of its OTC business and doubled the number of products made in its CMO facility. Meanwhile, the independent sponsor played an active board and oversight role alongside Sentinel. In 2018, after completing our investment objectives, WellSpring was sold in a highly successful transaction for Sentinel, the independent sponsor, and WellSpring’s management.
Case studies have been selected for illustrative purposes for management teams of midmarket companies considering a partnership with Sentinel and should not be considered an offer or solicitation of services or an actual or implied endorsement of Sentinel or any security, investment, or portfolio company. The portfolio companies highlighted are not representative of all current and prior investments of Sentinel. A list and description of investments since Sentinel’s inception is available on this website.