PE Hub
Inside the exit: How Vestar grew foodservice biz during covid lockdowns and sold it to Sysco
By Obey Martin Manayiti
Published December 14, 2023

After a six-year hold, New York headquartered Vestar Capital Partners recently sold Edward Don & Co, a Woodridge, Illinois-based distributor of foodservice equipment and supplies, to Houston-based Sysco Corporation. PE Hub caught up with Nikhil Bhat, a managing director and co-head of investments at Vestar. Bhat detailed Don’s growth strategy in a fragmented sector and discussed the subsequent recovery of the dining, travel and leisure sector after the pandemic lockdowns.

What was Vestar’s strategy for growing Don?

Prior to our investment, Don had been a family-owned and family-operated business. Led by CEO Steve Don, the company had an established track record of organic growth, pairing a customer-first culture with forward­ thinking investments in systems, infrastructure and people to build what we believed was one of the best-operated companies in the space.

Steve was looking to bring on a capital partner to help drive an inorganic growth strategy; the foodservice equipment and supply distribution industry was highly fragmented and ripe for consolidation, and we shared his and his team’s view that Don would serve as a high-quality platform for acquisitive growth. So, our primary investment thesis was to catalyze an acquisition strategy to help Don expand its geographic presence and add capabilities, while continuing to invest behind organic growth.

What role did add-ons play in growing Don?

Don made four acquisitions during our partnership [Myers Restaurant Supply, Shervan Colonel Equipment, Atlanta Fixture & Sales Co and Smith & Greene]. Our approach was to fully integrate acquisitions in order to support customer service levels and facilitate tight operational execution, so it’s tough to split out precisely, but acquisitions represented a significant minority of the company’s earnings growth during Vestar’s investment.

What drove Don’s growth?

Don grew pretty much across the board but there were a couple of areas that stood out. The company did a great job servicing multi-unit accounts – basically, growing regional restaurant chains that appreciated Don’s high­ touch, integrated service, and valued the company’s ability to grow alongside them as they expanded their own footprints. For similar reasons, Don also experienced strong traction with large national customers.

From a product perspective, disposables were a meaningful growth driver – restaurants invested heavily in takeout and delivery during the pandemic, and these channels’ popularity has sustained even with the return of in­ person dining.

During the depths of the pandemic, when supply chains were disrupted and demand was ebbing, Don maintained its investment in inventory, fill rates and service levels to make sure customers got what they needed, when they needed it.

This customer-first mentality really paid dividends when the dining, travel and leisure markets recovered.

How did the deal with Sysco come together?

For confidentiality reasons, I can’t comment on the specifics of the transaction. But in general, we believe management did a great job of creating a highly strategic asset – a fully integrated leader in the foodservice equipment and supplies distribution space with strong customer relationships, high-quality systems and logistics infrastructure, and a number of attractive avenues for continued growth. Both Sysco and Don saw the value in joining forces to provide their customers with even better service and a broader product assortment, which led to a great outcome for Don and Vestar

How did Don fit into your portfolio?

Vestar employs a thematically-oriented investment and go-to-market strategy, focused on opportunities where we believe we can add differentiated value to help management teams achieve their growth ambitions. We also pride ourselves on being good partners to family- and founder-owned businesses, with an approach that’s designed to support growth and value creation while enhancing, not leaving behind, the culture that made those businesses so successful in the first place. Given our thematic focus in foodservice and route-based services, and Don’s history as a family-owned business with a rich culture that was key to its success, the investment was a great fit for Vestar.

Are you planning to invest in this sector again?

We plan to continue to be active in both food service and route-based services. The secular trends and value creation levers that initially attracted us to Don continue to be relevant today, and given Vestar’s deep sector experience, we believe we can be value-added partners to companies and management teams in both of these markets.

To that end, in October, Vestar announced an investment in Tech24, a leading commercial foodservice equipment repair and maintenance provider. Though it’s a very different business, the value creation thesis shares many similarities to what made the Don investment so successful.

Vestar also has an existing investment in Roland Foods, a leading specialty foods importer. So, while we’re unlikely to find another foodservice equipment and supplies distributor that stacks up to the high bar set by Don, we’re certainly planning to leverage the experience and learnings from this investment as we pursue new opportunities in adjacent spaces.