The recent news about the private equity giant KKR’s highly lucrative exit of CoolIT has sparked a debate in the employee ownership ecosystem.
KKR has touted how much value was shared with workers – an average of $240,000 per employee, with longer-tenured workers receiving payouts of more than eight times their annual salary.
Some of my peers have countered that this does not amount to true employee ownership and have dubbed KKR’s approach “equity washing.”
At Candide Group, where I serve as chief investment officer, we believe the gold standard for employee ownership is a company 100% owned by employees, and where employee ownership is preserved over the longer term. That is how life-changing wealth for workers can be unlocked. As an SEC-registered investment adviser, we have facilitated client investments into eight intermediaries which finance conversions of companies into 100% employee-ownership.
Critics highlight two main issues with what KKR has called “shared ownership” and what Ownership Works, a nonprofit association of private equity firms, calls “broad-based ownership.” First, as in the case of CoolIT, workers had no governance rights in the company, and therefore had no say over the sale.
Second, distributions to workers paled in comparison to KKR and its investors’ returns. In KKR’s $4.8 billion exit from CoolIT, the payouts to workers represented only about 3.5% of the total proceeds. KKR’s investors received an eye-popping 22x more than the workers, while KKR itself made about 5.5 times more than the workers.
Nonetheless, in the case of CoolIT, I believe that the KKR model makes sense.
Glass ceiling
At Candide, we support many financing solutions used to enable employee ownership – including employee stock ownership plans, purpose trusts and co-ops (see, “Better financing can make employee ownership a game-changer for workers,” by Antony Bugg-Levine). The truth is that none of these solutions could have facilitated a conversion of CoolIT (or any of the other companies in KKR’s portfolio) into employee ownership.
KKR’s investment in CoolIT took place in a part of the market that is distinct, separate and complementary to our work in the employee ownership space.
This is primarily because there is a ‘valuation glass ceiling’ for employee ownership conversions. Employee ownership conversions are entirely debt-financed, so that the equity can stay in the hands of employees. This places a pretty hard limit on valuations, as there is only so much debt one can responsibly put on a business.
KKR acquired CoolIT at a valuation of 16.5x the company’s earnings before interest, taxes, depreciation and amortization, or EBITDA. CoolIT’s rapid growth in the data center industry meant that KKR was able to sell the company and to generate a 15x return within just three years.
Employee ownership conversions rarely make sense for companies that are valued above 6x EBITDA, because there is only so much debt that can be responsibly placed on a business.This is arguably even more important in the context of employee ownership. Because employee wealth and retirement accounts are tied to the value of the business, it would be irresponsible to take on excessive debt based on highly speculative hyper-growth projections.
At the end of the day, employee ownership conversions work best for companies with more stable, steady growth and profitability.
Know your lane
By all means, we should push KKR to expand employee participation beyond 3.5%. Success stories like CoolIT or CHI Overhead Doors (another iconic case study for KKR) should embolden private equity managers to make the case that more ownership can be transferred to employees without hurting LP returns (see, “Sharing wealth with workers creates value for private equity buyout firms. So why not share more?”).
The KKR model is anything but equitable. But it does create wealth that can be transformational for many employees – the average CoolIT employee received $240,000 over three years, which is in line with what employee owners at a 100% employee stock ownership plan, or ESOP, might expect to see in their accounts after 7-10 years. A National Center for Employee Ownership, or NCEO, study estimated that the median ESOP account balance is $80,500.
Our focus should be on converting many, many more of the companies that do fit the employee ownership model.
That means not entering into futile competition with private equity buyers who are willing to pay 2x or 3x more. The alternative for CoolIT was not 100% employee ownership – it was being acquired by another PE firm that would have shared 0% of the upside with workers.
There is no shortage of companies that are good candidates for employee ownership. But often management is either not familiar with this option or they lack the financing to support the sale. The vast majority of the roughly 250 companies that convert into employee ownership annually in the US are primarily “seller financed.” In other words, the seller can receive about 30-40% of the sale price at closing, but then extend a seller note, or loan, to the employees for the remaining 60-70%, to be paid back over time from the company’s revenues.
Expanding employee ownership
Candide’s focus is currently on two primary approaches to accelerate the growth of employee ownership:
Supporting the launch of new employee ownership-focused intermediaries. We are actively looking to support new fund strategies being launched to finance employee ownership conversions. We are also engaging with established private credit platforms that are not yet active in the employee ownership space, educating them on an opportunity they may have overlooked thus far.
Supporting the expansion of employee ownership through mergers and acquisitions. Holding companies like Empowered Ventures and HB Global have demonstrated the potential for growing employee ownership through M&A.
And we continue to explore financing solutions that can help seed and grow the next generation of employee-owned holding companies.
These kind of new lenders and other intermediaries are emerging to meet this demand, but many more are needed. In the coming decade, an estimated 600,000 small businesses will exit ownership each year, according to The Great Ownership Transfer, a recent study by McKinsey.
Private equity firms like KKR will acquire a tiny fraction of these businesses. There were just over 8,000 private equity transactions in the US in 2025, representing just over 1% of total business ownership transitions annually.
If we want to expand employee ownership, we can – and should – focus on converting more of the remaining 99% of businesses that are not attracting private equity capital and valuations.
Aner Ben-Ami is co-founder and chief investment officer at Candide Group.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
