How Platinum Equity Earned ‘Trust’ as Investment Partner for Kohler Co.

In late 2019, Platinum Equity was performing diligence on Kohler Co.’s energy resilience division.

Kohler Co., a global name with more than 40,000 employees, is known for its kitchen and bath products.

But the pandemic hit. With uncertainty, the Kohler family decided to temporarily pause the sale process.

Over the next few years, Platinum Equity remained in contact with Kohler’s management team, growing and strengthening the relationship.

In November 2023, Kohler selected Platinum Equity as the majority investment partner in its standalone energy resilience business, Kohler Energy. Kohler is still invested in the business, remaining committed to supporting the business’ upward trajectory and is aligned with Platinum Equity’s vision for the next steps. Kohler Co. Chair and CEO David Kohler is serving on the company’s board.

“Today we took a bold and strategic move for the future of our company,” David Kohler said at the time of the announcement. “Over the last 150 years, Kohler has embraced a relentless pursuit of providing exceptional products, services, and experiences for our customers. This important moment in our journey signifies our commitment to deepening the focus and investment in Kohler’s Kitchen & Bath and Hospitality businesses and continuing to drive growth within our respective industries. The timing is right due to the strength of the Energy business, which is driven by world-class products manufactured and sold by highly skilled associates. I look forward to supporting the Energy business through our continued investment along with my role on the board following the closing.”

Terms were not disclosed, and the transaction recently closed.

“We appreciate Kohler’s confidence in our ability to build on that legacy and support the energy business’ continued growth and expansion as a standalone company,” Platinum Equity Co-President Jacob Kotzubei said. “We have great respect for David and the Kohler leadership team and are proud to be their partners.”

Kohler Energy is comprised of multiple business units and has a broad portfolio of products including electric generators for both industrial and home settings, gas and diesel engines, and electric powertrain components.

The deal marks Platinum Equity’s latest complex carveout from a global corporate company. It completed similar transactions with familiar names like Ball Corporation, Caterpillar, Emerson Electric, Ingersoll Rand and Johnson & Johnson.

“An important reason we were chosen centers on our corporate carveout abilities and joint venture successes to date,” said Managing Director Matt Louie, who served as deal lead.

Louie offered additional insights about the investment.

Q: Platinum is the majority investment partner in Kohler Energy, and Kohler Co. has a minority interest. Why did a joint venture make sense here?

Louie: We like joint venture structures because they allow the seller to retain skin in the game. When sellers desire a joint venture structure with Platinum, we attribute it to our history of successes with joint venture deals. David Kohler has a strong conviction that the strategic investments he’s made in the business, combined with our operational capabilities, make a robust combination.

We are also intentional in searching for opportunities that can leverage our experience from previous industrial tech deals, like the ones we did with Vertiv and Emerson. We are always looking for ways replicate the success we’ve had with other industrial tech investments and build on themes and playbooks we have had success with.

Q: Why did Kohler reengage with Platinum after the process was shut down in 2019?

Louie: Building a foundation of trust is important for all deals. It is necessary to spend time with decision makers. It’s going to Wisconsin, having a meal, having a meeting, having coffee with different folks in the organization, including David Kohler. It’s about explaining how our firm was started and what is important to (Platinum CEO and Founder Tom Gores). It’s about listening to Kohler and understanding what is important to the other side. We’ve evolved over time as a firm, but we’ve stuck to the principles that have made us successful. I always view the more in-person time that we get with a seller, the better positioned we are. It sets us all up for increased chemistry post-transaction so everyone is aligned on building enterprise value.

Q: Why are carveout transactions a good fit for Platinum?

Louie: It is a core part of our firm. Gores started the firm by doing corporate carveout transactions. We have a long-standing history of successes in executing corporate carveout transactions, particularly on a global basis. I think we‘ve built a reputation trying to execute deals as seamlessly as possible while being a great transaction partner. That enables us to continue building out our operations team, which has done a good job of executing corporate carveouts and driving value. Together, that creates a kind of virtuous circle.

Q: What are the tailwinds for this business?

Louie: There have been measurable increases in the number of billion-dollar weather events, and they’re likely only going to continue. This should drive an increased need for resilient energy solutions. We also see a massive issue today with aging grid infrastructure. The majority of the world’s power grid was built over 40 years ago and in our view this leads to significant vulnerabilities as well as an inability to connect with modern renewable energy sources. Then you take the problem of an unreliable energy supply and you couple it with a surge in energy demand. There’s just been a significant increase in data and power usage as advanced technologies proliferate, which overlays with a long-dated and meaningful future data center build out. We are seeing so many trends here that are just pushing more and more consumption of power and energy and believe Kohler Energy sits at the nexus of these opportunities.

Q: How will Platinum’s operational focus help Kohler maintain its position as a leading energy resilience solutions provider?

Louie: We plan to leverage our industry relationships and our expertise around supply chains, manufacturing and digital marketing to drive efficiency and growth. It is our view that sustainability is also a critical focus. Kohler Energy has constantly evolved, investing in alternative technologies and developing innovative products that reduce the company’s carbon footprint. We’re going to continue supporting the R&D and innovation efforts to not only remain compliant, but also remain ahead of the curve as it pertains to increasing regulatory and emission standards globally.

At the same time, we have a huge amount of respect for the management team and the Kohler family. We’re going to build on and accentuate what David Kohler and his team have accomplished.