Story of the year: Private equity and employee ownership

Private equity’s success as an asset class owes to consistent outperformance of other asset classes.

GPs have used ESG criteria in their investing, embraced diversity in-house or launched climate funds because they know they can do these things without sacrificing superior returns. On the contrary, many believe they can do better, performance-wise, by also doing good.

The same logic applies to employee ownership, which this year was more often figuring into private equity value-creation strategies.

KKR, a pioneer of employee ownership, has played an influential role in this regard. Early on, it developed a conviction that an owner mindset – created by giving workers a voice in decisions – is key to business optimization.

KKR has shown, time and again, the practice can juice performance. The firm won Buyouts’ Deal of the Year for its 2022 sale of CHI Overhead Doors, where a shared equity scheme delivered an average payout to workers of about $175,000 and helped KKR earn its best return since the 1980s.

A sign that employee ownership is catching on in private equity is growing sponsorship of Ownership Works.

Thanks to new joiners this year, the non-profit advocate now has 24 GP founding partners, among them Advent International, Apollo Global Management, KKR, Leonard Green & Partners, Silver Lake and TPG.