Garage door manufacturer employees receive cash bonus on acquisition while private equity tests ownership model

In the otherwise sleepy town of Arthur, Illinois, this week brought a life-changing surprise for hundreds of workers at local garage door manufacturer CHI Overhead Doors.

CHI’s private equity owner, KKR, is selling the company to steelmaker Nucor for $3 billion. The sale represents one of KKR’s largest returns in recent history, generating a massive cash infusion for both the company and, uniquely, CHI’s employees, from truck drivers to factory workers.

On average, hourly workers at CHI receive a payout of $175,000, with the longest-serving employees making more than $750,000 from sales.

Rhonda Jamison, office manager at CHI, has been with the company for 17 years and will take home 5.5 times her annual salary.

“Words cannot explain how my thoughts went in a hundred directions,” she said. “I never expected so much money.”

The idea of ​​providing equity grants to ordinary workers in a sale came from Pete Stavros, co-head of US private equity at KKR. Stavros said he was interested in employee ownership from a young age because of his father’s work experience.

“My father was a construction worker for 45 years,” Stavros said. “He really loved his job, except for two things: First, he couldn’t make a fortune on an hourly wage. And second, the hourly wage itself really created a misalignment of incentives with his employer because the employer wants fewer hours and no overtime, and workers want the exact opposite.”

Employee Participation Model

After taking a managerial role at KKR, Stavros began experimenting with employee ownership schemes in the investments he oversees.

“We had good success. So it has delivered great results for companies and great results for workers,” he said. “This is not charity, it is not a gift. They have brought incredible productivity to the company.”

Now the company uses an employee ownership model in all of its acquisitions in the US and hopes to convince its competitors to do the same.

Other large private equity firms, including Apollo Global, Ares Management, Silver Lake and TPG, have partnered with Stavros’ non-profit organization Ownership Works. Each company has committed to introducing shared ownership models in at least three of its portfolio companies by the end of 2023.

Even Nucor will introduce its own profit-sharing scheme for CHI, and despite all the changes, CHI employees say they have no intention of leaving the company.

“We have more responsibility for ourselves and for our teammates,” said Kenroy Morrison, general manager of CHI in New Jersey. “It’s one of those things that I don’t see myself going anywhere. I’m here for the long haul.”

Morrison said he plans to put his bonus into a college fund for his two-year-old son.

As for Jamison, who spends her days answering phones and ordering supplies, she also has big plans for her newfound cash.

“Well, we’re going to Disney,” she said. “I’m going to pay off my house, I’m going to pay off my cars, and we’re going to give a little to the church and help my kids a little.”

https://www.cnbc.com/2022/05/17/garage-door-maker-employees-get-cash-reward-in-takeover-as-private-equity-tests-ownership-model.html Garage door manufacturer employees receive cash bonus on acquisition while private equity tests ownership model

Jane Marczewski

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