Some cried. Others were speechless. How front-line workers walked away with checks averaging $240,000 when KKR sold their company |
Some cried. Others were speechless. How front-line workers walked away with checks averaging $240,000 when KKR sold their company
It was showtime for the employees of CoolIT.
In the late afternoon of March 25th, as an unexpected snowstorm blanketed Calgary, Canada, around 600 mainly front-line workers of CoolIT Systems gathered under an immense tent for a highly anticipated Town Hall. Less than three years earlier, private equity colossus KKR had purchased CoolIT, and as it does for all its acquisitions, awarded equity to everyone. In this case, that meant everyone from thermal mechanical engineers to security guards at the liquid cooling purveyor for big tech infrastructure. Five days earlier, these folks got the official word that KKR and its partner the sovereign wealth investor of Abu Dhabi, were selling their employer to Ecolab, the industrial water treatment giant, for $4.75 billion, or around 18 times CoolIT’s roughly $270 million valuation when KKR took charge.
The employees knew they were shareholders, and that a sale would trigger cash payouts for everyone, and the crowd was about to find out how much. The new deal, and the money it would bring them, was still another stunner in what had been a dizzying rise under KKR, a moonshot that already left the old-timers I spoke to amazed. In fact, this event was something of a celebration for one of the top niche success sagas in the AI revolution.
Founded 25 years ago by an engineer tinkering in a garage, CoolIT first specialized in liquid cooling for gaming computers. But under KKR, it went all in on outfitting the burgeoning ranks of AI data centers. The hyper-scalers deployed its technology to pack servers at far more density than is possible using air cooling, and CoolIT benefited greatly by Nvidia’s insistence that its fastest GPUs be liquid cooled. Result: In the past three years, the former plodder’s revenues jumped three-hundred-percent, as the hyper-scaler share soared from 5% to 60%. It’s multiplied production capacity 30 times while mushrooming its manufacturing footprint to cover an area the size of over five football fields. “We were a small company where everyone was multi-tasking, and we were often struggling,” says Nga Morris, a supervisor who tests products for mass production. “I thought KKR would help us grow, but nothing like the explosion we’ve seen in the past three years.”
The assembled knew the huge sales price and that they’d get nicely rewarded, yet according to those I spoke to, harbored relatively modest expectations. “We had a lot of excitement and happiness going around the days before the Town Hall,” says Kenny Kong, a quality control and data analyst who joined in 2011 when CoolIT had 22 employees. “But I like most people didn’t know how the scheme worked [in determining payouts]. I’d looked at videos on YouTube from times when KKR sold other companies, and saw numbers like $10,000, or $30,000, or $50,000.” Kong was expecting a nice reward, he says, but nothing that would transform his financial standing.
The presentation opened with cheerleading for the ownership mindset that’s “getting everyone to pull together” by making employees “stewards of the business” from Pete Stavros, KKR’s global head of private equity and the figure who launched its employee ownership program. CoolIT CEO Jason Waxman, who took charge at the buyout, appeared by video from Portland where he got stuck in the snowstorm, avowed that he could “hear the shouting” from across the border. Then, Kyle Matter, KKR managing director and chairman of CoolIT, took the stage for the Main Event.
Employees had high hopes—and still got shock
The casting was impeccable. Matter—slim, dark-haired, attired in a dark blue zip-up sweater and matinee idol handsome—is a natural entertainer who savored every moment holding a mic. “I feel like a game show host,” he declared. “But on this game show, everyone is a winner!” He explained that each employee would receive cash at the closing, scheduled for Q3, based on two factors: Their annual base pay, salary, hourly or temp, and their years with CoolIT. Each category for length of service would garner a different multiple of their earnings in a lump sum, the longer the tenure, the higher the multiplier. “Should we get to the numbers?” Matter intoned. As the hearty roar displayed, this horde—featuring many attired in sweatshirts labeled “OwnIT” for the name of the CoolIT equity plan—this crowd wasn’t cooling it.
Matter proceeded to show the payday for the........