| Gwyneth Ketterer |
Last month Gwyneth Ketterer hobbled in to a dining room at Bear Stearns, steadying herself on the brace wrapped around her foot and ankle. When asked if crutches would aid her mobility, she shrugged the thought off, saying they only held her up more. Then she gracefully steered herself toward a chair.
As the chief operating officer of Bear Stearns Merchant Banking, not too mention a woman holding court in one of Wall Street’s last boy’s club, Ketterer is accustomed to overcoming obstacles and minor inconveniences. And it is that tenacity that has carried the Philadelphia native through the conduits of private equity.
Ketterer, 42, looks like a favorite aunt, someone you might entrust your most private secrets to. She will easily draw out personal details and offer advice, qualities that likely come in handy when negotiating deals with self-made entrepreneurs like Stuart Weitzman. In short, she is direct, talks fast and is smart as a whip, which might explain why John Howard, head of BSMB, tapped her to help him develop the business when he began building it in 1998.
The team, which is now 36-strong, has more than $1.5 billion under management. One of the most prominent players in middle-market retailing, the division has led some head-turning deals: it turned a $6 million investment in Federated Department Stores‘s “corporate orphan” Aeropostale in 1998 into $486 million after taking it public in 2002; Ketterer anticipates a 14-fold return from their $153 million purchase in 2002 of Lerner/New York & Company; and with a 40% stake in Stuart Weitzman and a 50% share in Seven For All Mankind, it has positioned itself well for future gains.
It is deals like these that make middle-market retail one of the hottest targets for private equity. Yet, Ketterer remains unfazed by the threat of competition, saying most other firms don’t understand the intricacies of these transactions.
“Too few firms are willing to take the time to understand the value in these assets because they’re complicated. It’s not an area a lot of firms play in,” she says. “We’re willing to spend more time on the road, willing to tackle the management difficulties these companies have. That’s all the special sauce that goes into making a deal very profitable.”
Not to mention that the firm is extending itself to other niche areas as well as expanding the definition of what comprises middle-market retail.
“Following the dotcom bubble burst, we decided we needed to refocus and said we need to get organized and communicate out our message,” Ketterer says. The firm now has three core silos – specialty retail, consumer goods and financial services – in which roughly 85% of the fund is invested. And it has begun to explore niche areas within these – such as the subprime loan market within financial services – as well as considering more partnerships.
And certainly Sarbanes-Oxley is causing more entrepreneurs to think twice these days about going public, which means more unique opportunities, especially in these areas. The firm is also expanding its interests in the financial services space with three of the five most interesting things on the horizon in that area, including deals with small regional banks and a proprietary derivatives company.
“We’ve been looking at ways to extrapolate our knowledge, especially in retail, to other areas,” she says. Healthcare receivables has been one target of this expansion. “When you dissect [these clinics] it is really a retail strategy box,” she says. “We’re not looking at it as a healthcare business but as a retail business. It is extremely attractive to us.”
Rising To The Top
Ketterer, a vanguard at breaking down the gender barrier in the mostly male world of private equity, became attuned to a career in finance listening to her academic father speculate on stocks as he read Barron’s each Sunday afternoon. After graduating from the University of Pennsylvania, she took a job as a financial analyst at Oppenheimer & Co. where she was first seduced by deal making doing leveraged buyouts and mergers and acquisitions. She joined Lehman Brothers a few years later in 1991 after getting her M.B.A. from Columbia University.
Ketterer, now a mother of two toddlers, moved with the venerable firm to London where she helped build out their investment banking business until she was lured back to the U.S. in 1995 to launch its merchant bank division. Ditching the cobblestones and brownstones of London, Ketterer moved into a spacious loft in lower Manhattan’s now-trendy Meatpacking District, then just a square of dilapidated buildings and run-down warehouses.
“I like being on the border of a funky neighborhood,” she says. “I had had enough of the Emily Dickinson-like living. This was the closest I could get to cobblestone streets and still have a loft.” Not to mention the location reinforces her street-cred, especially when interviewing young M.B.A.s. Ketterer also maintains a house in Orient Point on the north fork of Long Island.
The initial challenge of helping Lehman Brothers increase their merchant banking business began to wane when Ketterer became disenchanted with the firm’s business model. Ketterer left in 1998 after helping raise the $2 billion Lehman Brothers Merchant Banking Partners II to join Howard at Bear Stearns. Howard promised a self-directing arrangement within the investment bank.
“The key in doing this was making sure we had an autonomous structure,” she says. “The trick is to affiliate yourself with a house that has proprietary relationships but within which you can function as an independent firm.” Ketterer says too often the merchant banking division gets crippled by the house, which often has goals that differ from the division – the fundamental flaw of the merchant banking models on Wall Street, she says.
But Bear was willing to take the leap of faith. The house invested $500 million in the group’s first fund while allowing the division to maintain an entrepreneurial structure and spirit. The group, which is in eighth year, started off opportunistic though it focused on middle-market retail and consumer goods.
Talking to Ketterer it’s hard not to wonder why there aren’t more women like her out there, and to wonder why private equity has been deemed the last Boys Club on Wall Street. Ketterer’s answer is blunt: Women aren’t assertive enough, they don’t know how to take credit for their achievements and they don’t self-promote like men. They also tend to choose careers that are well-represented by women.
Ketterer’s advice: Look for the part of the business where men are – that’s where the money is.