For The Riverside Company, a $13 billion private equity buyout firm, broad-based employee ownership has evolved from a values-driven experiment into a proven lever for value creation.
The New York and Cleveland-based fund manager launched its Riverside Value Fund six years ago with the thesis that hands-on operational expertise could revive distressed and undervalued businesses. Riverside brought on veterans Marc Jourlait and Sean Ozbolt to lead the first $350 million fund.
Grounded in their Christian faith, the partners advocated employee ownership as both a market strategy and a moral imperative, in the belief that broad-based equity participation in the companies Riverside acquired would deliver meaningful payouts for workers — and more attractive returns for investors at exit.
“We took the leap of faith,” Jourlait tells ImpactAlpha. “I told Sean, ‘Put me in coach. Let me do this.’ Over the course of three months, I launched it back to back to back at three of our portfolio companies.”
“Being able to combine a great asset return for our investors and do good by our employees was a once in a lifetime opportunity,” he says.
Employees of PFB Corp., a US and Canada-based manufacturer of insulation products for residential and commercial buildings, got a $9 million payout when Riverside sold the company to Carlisle Companies for $260 million in October 2024. Through the Value Fund, Riverside purchased PFB and took it private in 2021. It launched the broad-based ownership program at PFB at the beginning of 2024.
With the sale, the equity payout to workers amounted to about three and a half months of pay, after only 10 months of the shared ownership program. Executives gathered employees in a company warehouse to announce the sale.
“Hey, we sold the company,” Jourlait told the workers. “‘And by the way, as shareholders, you now get a check.’”
“We literally hand them each an envelope that has the amount they’re going to get,” he recalls. “You’ve got people calling their spouses, calling their boyfriends and girlfriends, calling their parents, in tears, because they’ve never seen so much money.”
Payout targets
Riverside acquires and repositions growing global lower middle-market businesses generating revenues of between $60 million and $300 million. Last year, it closed its second Value Fund at $750 million. The firm is part of Ownership Works, an association of private equity firms that have committed to sharing a slice of their equity gains with the hourly and frontline workers at the companies they buy and sell.
“Broad-based shared ownership can drive stronger business performance when paired with intentional culture transformation that inspires employees to think, feel, and act like owners,” says Ownership Works’ Anna-Lisa Miller. “By aligning incentives across investors, management teams, and employees, we’re seeing stronger value creation, higher engagement, and meaningful savings and wealth-building opportunities for employee-owners.”
Miller said 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.
Last week, Ares Management launched a “Shared Prosperity Plan” at Landscape Workshop, an Alabama-based full-service grounds management company it acquired last year. The $596 billion firm says the broad-based ownership program gives all of the company’s 1,622 employees a stake in the company’s growth.
Blackstone, with $169 billion in assets under management, has committed to grant equity shares to most employees at its US portfolio companies (see, “Blackstone’s embrace of employee ownership signals a shift in private equity – and in the power of workers”).
The Riverside Company said last year that more than 1,100 employees of Riverside Value Fund companies had earned equity stakes. Jourlait said Riverside is targeting equity payouts of up to six months’ annual pay workers upon exit. At PFB, the exit came less than one year into the five-year ownership plan.
“It is a predetermined percentage of the proceeds that we model that gets distributed to workers,” says Jourlait.
Over Riverside’s longer three-year hold, the investment generated more than a four-fold return for the Value Fund’s limited partners, which include pension funds, university endowments, high-net-worth individuals and other institutional investors.
“Our investors love the program,” Jourlait told ImpactAlpha. “We tell our limited partners that we’re going to do this at every one of our companies, so they know that part of their proceeds are going to go to the employees.”
“Pension funds love it because you’re giving back not only to firemen, nurses and cops, but you’re giving to the blue-collar, hourly-wage workers,” he adds. “It’s the best thing you can do for your investors and an even better thing for the employees of your companies. It’s as simple as that.”
With such advantages, some advocates have argued that private-equity owners should share more of their winnings with workers. Brian and Katie Boland of the Delta Fund, a fund that invests in employee ownership, point out that employee payouts in PE-backed ownership structures may provide a nice bonus, but, after taxes, remain small relative to the returns of private equity.
In a scathing post last year, the Bolands derided such shared-ownership plans as “equity washing,” and called for stakes of at least 30% for workers, along with a voice in corporate governance. “We just don’t believe that what they’re doing is ownership,”
KKR’s Pete Stavros, who has championed broad-based ownership across that firm’s portfolio, disputed key aspects of the Bolands’ critique. Ownership Works’ minimum target is to deliver a payout equivalent to six months of salary after five years. At KKR, the goal is to add a full year’s pay after five years.
“What matters is dollars to workers,” Stavros told ImpactAlpha last year.
Culture of ownership
Launching an employee ownership program is often the easy part. When broad-based ownership becomes part of a company’s culture, it can improve workers’ productivity, strengthen safety and reduce turnover. For Riverside’s five- to seven-year repositioning strategy, those operational gains compound into improved margins and exit outcomes.
“You want this culture of ownership,” Jourlait says. “We even changed the employee entrance. We put ‘Owner’s entrance’ above the door.”
Jourlait recalls one new employee who notices that the plant’s startup procedure in the morning took two full hours. After studying the shutdown routine, the worker proposed a solution that helped reduce the time to less than five minutes. The simple fix helped Riverside save up to $200,000 across eight warehouse facilities. At a 10X multiple of that value at exit, that amounts to $2 million in value.
Also during Riverside’s shared ownership of PFB, injuries reduced by 75% and attrition by over 50%. The worker owners also became more engaged at work.
“That’s value, because when you have engaged employees, they want to work there. They want to come into work. They want to get their friends to come to work there. They’re not going to leave,” Jourlait says.
“Every cost saving, cost avoidance, the attrition, the safety, all this stuff has intrinsic value when multiplied by an exit multiple. And you easily get to $9 million of employee ownership value, which means the program easily covered its cost.”
Jourlait said employee ownership is not a good fit for every company. “Some company profiles are just tougher to make the math work,” he says. “It works really well in manufacturing, industrial where you have modest to low hourly-wage workers. If it’s Saas, AI, B2B, it’s tougher to do the math but not impossible.”
At KKR, Pete Stavros has overseen shared ownership programs at more than 80 portfolio companies, awarding billions of dollars in equity to over 180,000 non-senior management employees. Stavros says KKR has won deals from its competitors because of the firm’s commitment to employee ownership.
“There have been some CEOs who have been pretty vocal that, ‘Hey, this was a close race at the end among multiple buyers, and we chose KKR because of their orientation towards workers,’” Stavros told ImpactAlpha. “It’s not just ownership. It’s the broader ethos around how people are treated, information sharing, employee engagement, teaching financial literacy that’s been pretty attractive.”
Hourly workers
At a time of widening wealth gaps, private equity’s move from cost-cutting through layoffs to sharing a portion of its upside with workers is strikingly timely. Only half of US households have some form of retirement savings, and nearly two-thirds of workers live paycheck to paycheck.
“The guy or gal that’s making 20 bucks an hour, they’ve got credit card debt at 24% interest. They got a mortgage that they can’t pay down or can’t afford a home. They’ve never heard of a 529 plan to send their kids to college,” says Jourlait.
Riverside has launched board-based ownership programs at six of its Value Fund’s eight portfolio companies, including SCRAM Systems, a Colorado-based provider of electronic monitoring and alcohol detection technology, and Siffron, an Ohio-based business-to-business retail merchandising and display solutions company.
The programs are designed to be inclusive of every worker, from hourly wage employees to senior management. Riverside collects data on current salaries, and projects over five years, factoring in inflation, expected retention and promotions, to determine equity payouts. That design is to ensure employee-owners in Riverside’s programs share in future gains alongside investors. Workers must be active employees at launch and exit to qualify for payouts.
“If somebody retires like the week before we exit, or if somebody’s on maternity leave, we do the right thing,” Jourlait says. “But if somebody leaves two years in and we exit in five years, they forfeit. You have to be here to participate.”
Riverside also launched the program at The Vomela Companies, a Minnesota-based graphic design company it acquired last year. That program now includes Moss, an event and retail graphics business Vomela acquired in December.
About 1,900 of Vomela’s 2,100 employees are hourly wage workers. “So right there, you’ve got a population that doesn’t have access to equity [and] are the ones actually creating the value,” he added. “So the math on the six months of salary versus the average salary, it works.”
“We took the risk, we took the capital and our reputation and we put in the effort, but ultimately, it’s the company’s employees that are creating this over the course of a three or five-year period,” he added. “In the traditional model, they get nothing. They just get their paycheck.
“Here we say, ‘No, you get your paycheck because you come to work every day — and you’re no longer renting, you’re owning.’”
