Advent, Sterling join employee ownership advocate Ownership Works

Advent International and Sterling Group joined Ownership Works, suggesting employee ownership may be catching on in private equity.

Two months ago, Sterling became a founding partner of Ownership Works, a non-profit dedicated to promoting shared ownership in the workplace. Advent followed in July, bringing total private equity affiliates to 24.

Ownership Works was launched in 2021 by Pete Stavros, co-head of global private equity at KKR. It has since seen steady growth as GPs and others – in all, more than 75 groups, including banks, foundations and pensions – endorse a goal of creating $20 billion in wealth for workers by 2030.

Ownership Works got started with the backing of 19 private equity firms. Among them are Apollo Global Management, Ares Management, Goldman Sachs, KKR, L Catterton, Leonard Green & Partners, Oak Hill Capital, Silver Lake, TPG and Warburg Pincus.

Together with Advent and Sterling, post-2021 joiners are Ardian, Building Industry Partners and Riverside Company.

In the coming months, additional investors are expected to sign on, Anna-Lisa Miller, executive director of Ownership Works, told Buyouts. She said the organization is presently in conversations with more than 15 private equity shops that have expressed an interest.

Ownership Works partners with businesses and GPs to encourage the spread of shared equity programs across corporate America. Citing multiple research studies, it argues such initiatives can help “reinvigorate corporate cultures, create meaningful wealth-building opportunities for employees, uplift families and improve business performance.”

In private equity, this notion has been advanced recently by experimentation with a variety of employee ownership and engagement models.

KKR is a pioneer in this regard, applying shared ownership principles to its investing since 2011. Beginning with Stavros-led activity in the industrials industry, the practice has expanded to take in control investing in other sectors across the entire Americas platform.

The experience has translated into some big wins. An example is last year’s sale of CHI Overhead Doors to Nucor for $3 billion, generating a 10x multiple – KKR’s best return since the 1980s. Key to this was a scheme that delivered an average cash payout of $175,000 to the garage door manufacturer’s 800 workers, well above an expected $15,000 payout.

CHI is one of 30-plus companies supported by KKR in awarding billions of dollars to more than 60,000 non-management employees, according to the firm.

Ownership Works’ original 19 private equity backers pledged to implement employee ownership in at least three portfolio companies by 2023. As part of its mission, the non-profit facilitates this process by advising GPs on relevant techniques and tools, Miller said.

“We walk them through the how-tos,” she said, including ways of overcoming the “administrative complexity” of extending financial incentives beyond management to a large workforce. KKR’s “tested out approach,” she noted, “provides a readily replicable model.”

These efforts are meeting with success. Among its founding partners, Ownership Works reports 72 board-approved shared equity programs executed in businesses that are private equity-owned, impacting about 100,800 workers.