KKR's LBO of CHI Overhead Doors Yields 10x Return
A case study of KKR's 2015 leveraged buyout of CHI Overhead Doors highlights how the firm achieved a 10x multiple on invested capital (MOIC) and an approximate 50% IRR. KKR bought the company at 13x EBITDA and grew revenue 2.4x while expanding margins to over 30% through operational improvements and employee ownership programs. The firm exited the investment for $3 billion, showcasing a model LBO execution focused on value creation beyond financial leverage.
- The 2015 acquisition of CHI Overhead Doors from FFL Partners was a $685 million transaction, which KKR preempted from a wider auction process. The eventual buyer in 2022 was steel manufacturer Nucor Corporation. - The employee stock ownership plan was a core part of the value creation strategy, culminating in an average cash payout of about $175,000 for each of the 800 employees upon exit. Payouts for the most tenured plant workers and truck drivers reached as high as $400,000 and $800,000, respectively. - This equity participation was an incremental benefit for employees earning under $100,000 and was not given in exchange for wage or benefit concessions. During the holding period, wages saw significant increases, rising 7% in 2020 and 12.5% in 2021. - The deal was led by KKR's Co-Head of Global Private Equity, Pete Stavros, who has championed the firm's broad-based employee ownership model since 2011. This strategy has been implemented at over 25 KKR portfolio companies. - Operational improvements went beyond financial engineering to include the construction of a second manufacturing plant in Indiana and the implementation of the Toyota Production System (TPS) to improve efficiency. These changes gave CHI a significant competitive advantage, with delivery lead times of two to three weeks compared to competitors' 20 to 30 weeks. - KKR also invested in the work environment based on employee feedback, adding amenities like factory air conditioning and an on-site health clinic. These initiatives contributed to a more than 50% reduction in both the rate and severity of workplace injuries. - The transaction team included Goldman Sachs as the lead M&A advisor, UBS as a co-advisor, and Kirkland & Ellis providing legal counsel. - Following the success of this and similar investments, KKR became a founding partner of Ownership Works, a non-profit organization dedicated to expanding employee ownership models, alongside more than 60 other organizations.
