The hall erupted into joyful cheers and embraces as 800 employees of CHI Overhead Doors learned of the company’s sale.

Some wiping away tears, many beaming proud smiles, they were mostly factory floor workers, residents of Arthur, a small, rural Illinois village with Amish roots. Their elation owed to the fact they were also owners, thanks to a shared equity scheme put in place when KKR bought CHI.

Pete Stavros, KKR’s co-head of global private equity, was telling workers at the May 2022 meeting that CHI’s operational gains since the acquisition were “beyond anyone’s wildest dreams of what could have been accomplished here.”

But it was Stavros’s next announcement, about what employees would earn from their contribution to results, that set the gathering afire.

Expected to deliver an average cash payout of $15,000, CHI’s June 2022 sale to Nucor would instead ­distribute about $175,000 on average. The packet would be even larger for most ­tenured employees: as much as $400,000 for plant workers and $800,000 for truck drivers. For employees, not to mention the town of Arthur, where the median household income is $58,920, this was an extraordinary windfall.

‘A million different things’

KKR acquired CHI in 2015 from FFL Partners, pre-empting an auction. By the private equity giant’s standards, the investment was small: $685 million.

“We want this to be the new normal for business, that everyone participates when things go well”

Pete Stavros, KKR

CHI, however, was appealing to KKR, Stavros tells Buyouts. A manufacturer of residential garage doors, commercial doors and rolling-steel doors, it was profitable and had distinct competitive advantages.

“We’re always looking for a certain prototype, which is a fundamentally good business that we think we can make great,” Stavros says. “And that’s what we saw in CHI.”

CHI then sold some 600,000 doors per year. Its process since 1981 involved shaping rolls of steel, assembling door fronts and backs, filling some with ­polystyrene or polyurethane, putting in glass panels or wood decoration and preparing panels and door hardware for shipment.

KKR saw room for improvement. Priority areas, Stavros says, included how raw materials were sourced, how products were made, marketed, sold and delivered, the efficiency of plant operations, and the need for more capacity.

“There were just a million different things that we saw potential in,” he says.

To realize this potential, KKR also saw an opportunity to partner with workers by introducing an employee ownership and engagement strategy.

Opening doors for workers: CHI employees at a company meeting in May 2022 react to Pete Stavros
announcing their

KKR is a PE pioneer of employee ownership. Early on, the firm developed a conviction that an owner mindset – created by giving workers a voice in decisions and aligning interests – was key to business optimization. It could, for example, address often overlooked issues, such as high turnover rates.

Since 2011, KKR has applied employee ownership principles to its portfolio. Beginning with Stavros-led investing in industrials, and companies like Capital Safety and Gardner Denver, the practice has since been expanded to other sectors and control investments across the Americas Private Equity platform.

Engaging with workers

A first step taken at CHI was the 2016 hire of Dave Bangert as CEO. Formerly a Danaher executive, he was motivated to join because of KKR’s interest in employee ownership and “all the things we’re going to try to do to make the business better,” Stavros says.

Stavros and Bangert together drew up a plan for CHI which borrowed from, and built on, prior strategies deployed by KKR.

Stavros receiving a chicken named Henriette, a gift from CHI and its employees.

It included soliciting feedback from workers, in part through a first-ever survey, and then moving swiftly to act on that feedback. The company, for example, set aside funds for new workplace amenities, such as air conditioning in the factory and an on-site health clinic.

Further, employee input contributed to an overhaul of health and safety procedures. Focused on essentials like machine-guarding and new personal protective equipment, it led to a more than 50 percent decline in both the rate and severity of injuries.

The shared equity scheme was also implemented, creating a pool for factory floor workers and purchase options for managers, customer-facing employees and truck drivers. Requiring no trade-offs with wages or benefits, it came with pre-paid personal financial training.

Finally, CHI interacted with Arthur and surrounding communities, organizing events for employees, their families and neighbors. In addition, it donated funds to a charity selected by workers: Home For Our Troops, a builder of custom homes for injured veterans.

Though rewarding, Stavros says, engaging workers at all these levels is a “long and arduous process.”

“It’s challenging,” he says. “It incorporates teaching basic financial concepts about how the company makes money; what the improvement plan looks like; and how we can dissect the business plan for individual factories, manufacturing lines, shifts, so people know how their efforts are helping it succeed.”

‘Winning in the market

But the results, Stavros adds, were not long in coming. Engaging with employees, he notes, assisted inception of the Toyota Production System (TPS), and Kaizen, a TPS pillar that emphasizes ongoing improvements through collective problem-solving.

Due to this and other measures, CHI began to see broad operational gains – in everything from procurement and scrap reduction to labor productivity and networking capital optimization.

It was also “winning in the market,” Stavros says. Since 2015, the company’s lead-time advantage had risen sharply: “You guys are delivering doors in two to three weeks,” he said to employees. “Our competition can’t deliver sometimes for 20, 30 weeks.”

By 2022, the company’s EBITDA had grown more than 3.5x on an organic basis, from $61 million to $229 million, while its EBITDA margin improved by over 1,400 basis points, from 20.5 percent to 35 percent.


KKR’s multiple on original equity invested


Price tag Nucor paid for CHI in June 2022


Average employee payout through shared equity scheme

Revenue increased by nearly 120 percent organically, enabled by construction of a second plant in Indiana, digital capabilities and salesforce effectiveness.

If these results awarded workers an outsized payday, the take-home for KKR was no less hefty. CHI was acquired by steel manufacturer Nucor for $3 billion – 10x the original equity invested and the firm’s best return since the 1980s. The gross IRR was 42.3 percent, and the net, 37.8 percent.

Ownership works

Stavros concluded the boisterous May 2022 meeting by telling CHI’s 800 employees: “We want this to be the new normal for business, that everyone participates when things go well.”

To this end, Stavros last year helped launch Ownership Works, a non-­profit dedicated to promoting employee ownership. It was supported by more than 60 partners, among them 19 PE firms committed to carrying out their own strategies in at least three portfolio companies by 2023.

Along with KKR, those taking the pledge included Apollo Global Management, Ares Management, Goldman Sachs, Leonard Green & Partners, Silver Lake, TPG and Warburg Pincus.