PODCAST: What does employee ownership mean for investors’ returns?

PEI senior reporter Carmela Mendoza and senior editor Adam Le discuss how private equity firms sharing equity with an entire workforce can create upside and value for investors.

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Private Equity International’s Deep Dive for October explores how employee ownership programmes, which seek to combine wealth building with democratic ownership, work for both GPs and LPs.

KKR’s sale of garage door manufacturer CHI Overhead Doors to Nucor Group in May was a success story for the concept of equity grants for all. CHI’s 800 employees, who had a payout of $360 million in total on completion of the deal, received between 1.5 to 6.5 times their individual annual salaries.

Studies including those from the Rutgers School of Management and Labor Relations and research firm Gallup repeatedly show the benefits of employee ownership on engagement, performance and company culture. How this impacts fund mechanics and investors’ returns, however, is not fully understood.

In this episode of Spotlight, PEI’s Carmela Mendoza and Adam Le discuss the employee ownership model implemented by private equity firms including KKR, LPs’ reactions to it, whether more GPs will adopt the programme in their portfolio companies and how this could be where the industry is headed.