- Leadership: Dan Madsen
- Prospect Team: Erik Maurer, Brad O’Dell
- Location: Ontario, CA
- Industry: Value-Added Distribution
- Investment Date: November 2007
- Exit Date: April 2014
Gold Star Foods distributes a broad line of food items to school districts in California, Arizona and Nevada. The business started largely distributing frozen foods, but soon expanded its reach into higher value, higher margin segments including fresh bread and produce.
School districts participating in the federally‑funded National School Lunch Program receive free government commodities they can utilize to lower their food costs. Gold Star manages the data to ensure their school district customers receive credit for these free commodities when put into a food item: e.g. block cheese added to a frozen pizza. This value-added capability separates Gold Star from the market’s other broadline food distributors.
Our investment in Gold Star provides an example of how we work with strong, entrepreneurial owners to help affect a generational transition, so that the Company can build on the legacy established by the founders.
We were introduced to the founders of Gold Star via an investment banker. They were looking to find a partner to help facilitate a transition to the next generation of leadership in the business. Initially, they were not able to put together the transaction they wanted during a traditional sale process. Prospect Partners quickly established a strong rapport, and was ultimately able to structure a deal that balanced the current and future economics they wanted with a path for their management team to assume leadership of the business.
We saw an experienced, family-led leadership team providing a unique, recurring service with a proven playbook for profitable growth in a niche market segment. As a result of the Company’s exceptional service, Gold Star had excellent contract retention levels and a very stable customer base. Prospect Partners made a control-equity investment in Gold Star and worked closely with the team to expand the leadership group and modernize the approach to the market.
- Evolved to be a data-driven organization, which provided the opportunity to partner with the largest school district in California to deepen the relationship and significantly grow the business
- Completed one add-on acquisition that expanded the reach into a highly profitable adjacent market
- Entered new contiguous geographic markets
- Strong partnership initially with George Thorsen and Lenny Amato and then with Dan Madsen
- Implemented first equity incentive program for other managers
- Developed structured board reporting package with appropriate KPIs and metrics
- Building upon a strong existing financial organization, completed first external audit
- Selected and implemented an industry specific ERP system
- Moved into a custom-designed, state-of-the art distribution facility
Management Team Additions
- Recruited a highly talented CEO, Dan Madsen, to succeed the founders and facilitate a smooth transition
- Added first outside salesperson and first CFO to broaden and deepen the leadership team.
- Built out the finance organization to allow senior management to spend more time on operations
In 2014, Prospect Partners sold its interest in Gold Star Foods for a significant gain to a larger private equity fund.
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