As private equity companies begin to embrace broad-based employee ownership plans, many aim to supplement their workers’ pay with stakes that add about six months of salary after five years.
The New York-based private equity giant KKR, the biggest champion of such shared ownership, aims for a full year’s salary.
On Wednesday, employees of CoolIT, a Calgary-based liquid cooling company, learned that many would be going home with more than eight years’ pay. The rich payday is the result of KKR’s own hefty exit. The private equity firm sold CoolIT to Ecolab, a Minnesota-based provider of water, hygiene and infection prevention solutions, in a deal valued at nearly $4.8 billion. The firm says it is one of its largest exits in recent years and the biggest in KKR’s shared-ownership portfolio.
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When KKR’s Pete Stavros shared the news with employees gathered in a large heated tent on a snowy afternoon, the crowd broke into tears and cheers; some workers literally jumped for joy. Even the lowest payouts for newer employees equaled a full year’s salary.
“This will solve a lot of my problems, from paying off my student loans to paying off my house mortgage,” Shaaz Nazari, who joined CoolIT last week, told ImpactAlpha.
Stavros told the workers they had helped drive the outcome and make the company a success.
“Looking around the room and seeing people’s faces, it was just this combination of elation and disbelief and shock and relief and excitement,” Anna-Lisa Miller of Ownership Works says. The nonprofit association works with private equity firms to implement shared ownership plans and has a goal to share $20 billion in wealth with global workers by 2030.
“Today is an example of just the difference you can make in the lives of people and families by making some different choices in how we allocate capital and who gets a chance to participate,” Miller said.
AI economy
The hefty payday for CoolIT’s workers is a function of the dramatic growth of data centers, and with that growth, demand for the kind of cooling systems the company installs. That CoolIT’s hourly workers had a stake at all, however, is a proof point that broad employee ownership is especially important as AI sweeps through the economy and the job market.
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KKR paid $270 million three years ago to acquire CoolIT, which provides liquid cooling for energy-intensive AI data centers. Mubadala Investment Company, the state-owned investment vehicle of Abu Dhabi, co-invested alongside KKR.
KKR’s $4.8 billion exit marks a 15X return over three years on its equity investment, inclusive of distributions. In comparison, the CoolIT exit is five times larger than KKR’s $3 billion sale of CHI Overhead Doors to Nucor Corp. four years ago, when workers received on average $175,000 in payouts. Since 2011, 85 KKR portfolio companies have awarded billions of dollars in equity to more than 190,000 non-senior management employees globally.
“CoolIT demonstrates the power of a true ownership culture in driving meaningful results for both companies and employees,” says Stavros. “When employees are owners, they have a direct stake in the company’s success and help drive the innovation and execution that fuel long-term growth.”
CoolIt’s 650 employees will receive average payouts of $240,000, along with financial coaching and tax preparation to help maximize earnings. The longest-tenured workers received payouts of more than eight year’s worth of annual pay, while those who joined this year received the equivalent of a full year’s salary.
As in most private equity exits, senior management and executives likely saw significant larger payouts.
Value-add strategy
Under KKR’s ownership, CoolIT has grown into one of the largest liquid cooling providers to the hyperscalers and co-location operators running AI data centers. CoolIT’s cooling helps them improve equipment performance and improve operational spending, as well as lower energy usage, carbon emissions and water consumption.
KKR said CoolIT’s solutions delivered nearly 2.2 billion kilowatt-hour in energy savings for its customers last year. Some of those customers include chipmakers such as Nvidia and Advanced Micro Devices. Also during KKR’s ownership, the company added over 300 jobs, expanded its manufacturing footprint and coolant distribution capacity.
Ecolab’s purchase of CoolIT is part of its growing focus on AI infrastructure like data centers and semiconductors. Data centers and chip fabs are water- and energy-intensive. That gives the company an opportunity to meet demand for water recycling and cooling solutions.
“AI is transforming the demands on data centers, and liquid cooling is one of the critical technologies that makes advanced computing possible,” said Ecolab’s Christophe Beck.
“This acquisition expands our role in serving the AI ecosystem — semiconductor fabs that manufacture chips, power plants that fuel the chips, and data centers that utilize the chips — and positions Ecolab as the partner that the world’s largest technology companies rely on to grow responsibly and sustainably.”
Ecolab says it expects CoolIT to generate about $550 billion in sales over the next year.
Global expansion
KKR’s investment in CoolIT came from its $2.8 billion second Global Impact Fund. The ownership exit was the strategy’s first in the North America region.
Since Stavros launched Ownership Works in 2022, the nonprofit has recruited dozens of private equity partners to share a slice of their equity upside with workers of their portfolio companies, including The Riverside Company, which has committed to launch shared-ownership programs across its buyouts portfolio.
Broad-based equity programs at more than 180 companies in the Ownership Works network have generated over $11 billion in value for workers. Of that, $1.3 billion has been distributed, with another $10 billion expected in future payouts.
“We have aspirations for this movement to be a global movement,” says Ownership Works’ Miller. “And in many ways, like in this one tent in Calgary, this felt like a moment of more global impact given the workers from many, many different parts of the global being represented in this workforce.”
The private equity shared-ownership model can be flexible to create value for workers across public companies, family-owned businesses and even small businesses, Miller said. “Our hope as an organization is that there will be enough models that proliferate that will work for businesses of various structures that will all lead to incredible outcomes for workers.”
Ownership Works plans to set up a hub in Europe and expand its US presence through regional offices. Last year, Ownership Works opened its first international office in Tokyo, Japan.
“We’re trying to think of as many ways as we can to inspire investors and business leaders to implement the model by continuing to be a part of creating great case studies of how this moves the needle for company performance, and how it can move the needle for employees, families and communities,” Miller says.
