Leveraged Recapitalization:

Transitional Sale

Gold Star Foods, Inc.
Ontario, California

Type of Business: Specialty foodservice distributor serving public school districts in the southwest

In 2007, Gold Star Foods, Inc. (Gold Star) one of the nation's leading foodservice distributors to public school districts, found itself at a critical juncture with the imminent retirement of its cofounder, Lenny Amato. Gold Star had carved out a unique market niche by addressing the specific needs of school food programs and offering innovative solutions for nutritional school meals for students ages K-12. Gold Star sought an outside investment partner that could help the company successfully transition to the next generation of management — which included Lenny's daughter, Cindy, and other cofounder, George Thorsen — and prepare the business for George's eventual retirement as well as navigate the many opportunities presented by market growth. Management continued to own meaningful stakes in the recapitalized business.

Our Strategy:
As Gold Star worked to deepen and expand its reach to more school districts in California, Arizona and Nevada, Prospect Partners supported needed investments in operations and infrastructure — specifically, in systems, facilities, and select add-on acquisitions to diversify Gold Star's product offering. Toward that end, Gold Star implemented cutting-edge accounting and enterprise resource management (ERP) systems, which enabled the company to integrate key business processes and develop a scalable platform for account management and growth. Several years into our investment, we worked with the team to recruit a new CEO, industry veteran Dan Madsen, facilitating a smooth retirement for George. Dan and Cindy then successfully led Gold Star's move to a new, state-of-the-art facility, which dramatically improved capacity and efficiency and became a showcase for customers. Finally, Gold Star completed the strategic acquisition of ASR Food Distributors, Inc., a California foodservice distributor that specialized in fresh produce. The company further expanded its "fresh" product offering by initiating programs with local food suppliers and farmers.

Results: During Prospect Partners' seven-year investment, Gold Star strengthened its leadership position and more than doubled its revenue by growing its customers base and expanding its relationships with existing accounts by servicing a greater share of school districts' overall foodservice needs. By 2014, Gold Star served nearly 400 school districts — more than 3,500 schools. Its products were part of over three million school breakfasts and lunches served daily. Gold Star also was able to nimbly respond to a changing legislative landscape when new federal regulations established new nutritional guidelines for school breakfast and lunch programs. The company's technology platform proved market-leading, featuring online access that helped customers plan compliant menus, place customized orders, access real-time reports and provide real-time inventory management.

In April, 2014, Prospect Partners sold its interest in Gold Star for a significant gain to a larger financial buyer. George, Cindy, Dan and other members of the management team benefited directly from the transaction. Management re-invested in Gold Star to participate in the next phase of the company's growth.

Our Philosophy: To be a collaborative partner, providing management the necessary financial resources and strategic guidance to help them take advantage of the many opportunities to grown and create value in the business.

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"Working with Prospect Partners was truly a fantastic experience. We got real partnership, the perfect blend of freedom to manage the business and Prospect Partners being there when needed as a collaborative sounding board and an investor. We shared the same goal: to drive long-term value in the business, and to make customers happy.”

— Dan Madsen, CEO,
Gold Star Foods, Inc.


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