KKR and CHI Overhead Doors (B): Raising Company Performance While Improving Social Equity

Published 08 Mar 2023
Reference 6802
Industry Private Equity
Region North America
Length 14 page(s)
Summary

When staff as well as investors participate in a profitable exit by a global private equity firm, the industry pays attention. KKR’s sale of CHI, a garage door manufacturer, for a 9.8X multiple of invested capital (MOIC) made headlines in early 2022 as one of KKR’s highest returns since the 1980s and for CHI’s hourly workers and truck drivers for whom the pay-out would be life changing. More than 600 strong blue-collar workforce got an average of US$175,000 each, rising to US$800,000 for the longest serving employees. KKR had acquired the company in 2015 for US$700 million, and sold it to Nucor Corp for US$3 billion in early 2022. The celebrations were the result of a movement led by Pete Stavros, Chairman of CHI, and also Co-Head of the Americas Private Equity platform at KKR, who had worked with CHI management to give every employee an equity stake in the company, allowing them to participate in its growth as well as a substantial return upon KKR’s exit. The case shows the power of equity ownership and incentive structures, as well as the challenges of implementing such fundamental changes in any business, setting the scene for discussions that go beyond DEI (diversity, equity and inclusion) to tackle issues such as social justice and the equitable distribution of wealth.

Teaching objectives

The case discusses the social impact of equity ownership and inclusion through employee engagement and broad-based equity distribution, opening the door to the discussion of wealth inequality, social justice and the power of equity ownership in a manufacturing company. It highlights the role that private equity can play by implementing new incentive structures that not only improve company performance but can alleviate wealth inequality by spreading the value created by improved company performance across a much wider swath of employees. It shows how micro adjustments at the company level potentially translate into macro impact at the national level by addressing inequality, productivity and even technology disruption. The structure and equity plan implemented at CHI offer insights on how “double bottom line” measures of financial performance and social equity can achive impressive outcomes for all stakeholders.

Keywords
  • Social Equity
  • Inclusion
  • Wealth Distribution
  • Wealth Generation
  • Private Equity
  • Management Compensation
  • Equity Distribution
  • Shared Ownership
  • Employee Engagement
  • ESG
  • DEI
  • Social Justice
  • LPs
  • GPs
  • Q12023