In the field of scientific research, a great deal of work revolves around knowing what is not known – in other words, determining what’s in the so-called “black box.” That same curiosity about what makes things tick played a major role in Gwyneth Ketterer‘s decision to enter the private equity business.
“I came from an academic family and toyed with just going and getting a Ph.D. in clinical psychology,” she says, “but there was this black box called Wall Street that I read about on Sundays with my father . . . and I didn’t understand it, and I hated things I didn’t understand.” So with a craving for knowledge and the desire to do “something a little entrepreneurial,” Ketterer took it upon herself to enter that black box, and has now made a successful career of it.
Now a managing director with Bear Stearns Merchant Banking, Ketterer has helped grow three private equity groups from their infancy. Throughout her career, Ketterer’s fundamentals haven’t changed: a passion for building businesses, a strong work ethic and the self-assuredness that women, like men, can accomplish anything they set their minds to.
Laying the Groundwork
Always seeking a new challenge, Ketterer got her first taste of the corporate world through an internship with General Motors Corp. during college. “I thought, What don’t I know anything about?’, and it was corporate America,” she recalls. Marking one of many firsts in her career, Ketterer was the first woman to be accepted into GM’s summer internship program. Although she found her internship to be interesting, she longed for a more entrepreneurial environment.
In 1986, straight out of her undergraduate program at the University of Pennsylvania, Ketterer signed up with Oppenheimer & Co., where she served as a financial analyst with the group’s 12-person M&A and leveraged buyout group. And again, she was the first woman to be hired by that group Oppenheimer. It was at Oppenheimer, which had just taken itself private and was dabbling in LBOs, where she really learned the ropes of the private equity industry. “This was exactly the time when the whole art form of leveraged buyouts was coming into being,” says Ketterer. “It wasn’t a known analysis like it is today. Then, you were really at the cutting edge.”
After two years with Oppenheimer another opportunity presented itself to Ketterer through Stephen Conway, whom she had met while doing deal analysis at Oppenheimer. Like many other Wall Street big shots at the time, Conway was trying to start a boutique merchant banking firm. “He started a small merchant bank in the purest sense of the British word,” says Ketterer. “In sort of the old-fashioned sense of what was a merchant bank, he wanted to provide clients with advisory as well as have some capital.”
Considering it a great stepping stone, Ketterer joined S.J. Conway & Co. in New York as an associate. However Conway’s economic model, which focused on smaller, developing companies, faltered because those companies were unable to pay Conway the cash needed to sustain the business. So Ketterer headed to Columbia University’s business school, where she studied international business and finance.
Landing a summer job during graduate school with Lehman Brothers, which she felt was more “eclectic” and less “cookie cutter” than some of the other large banks with global platforms, Ketterer was on the fast track to her career in merchant banking. She returned to Lehman after earning her M.B.A. in 1991 and knew she wanted to be involved in building businesses.
Merchant Banks in the Clouds
From the get-go, it was all about building for Ketterer, who currently spends her free time renovating her loft in downtown Manhattan. Just as scientific thought would suggest, Ketterer, whose father was a professor of electrical engineering, resolved that the best way to learn how something works was to build it herself. “I was always fascinated with taking things apart and putting them back together,” she says.
Over the next decade Ketterer would take on several building projects. Taking a position in Lehman’s London office, she helped build its international banking franchise, as well as the capital markets in the Republic of Turkey through her involvement with the first privatization in that country. “That was an extraordinary opportunity,” says Ketterer. “I learned a lot about developing countries, capital markets and privatizations because we had the ability to work with various ministers to establish western-style policies and markets.”
One of the people she met in Europe was Steven Berger, who was heading up Lehman’s international business. In the mid-90s, Berger was redeveloping a merchant banking division for Lehman as the group’s original merchant banking business was spinning out into The Cypress Group. Ketterer was the first person asked to help with the initiative. She returned to the U.S. in 1995 to help build a merchant bank within the investment bank at Lehman. “It’s very difficult to get the model of the merchant bank working well inside the investment bank,” she says. “You’ve got natural conflicts that exist between the businesses.”
Yet today the Lehman group that Ketterer helped put in place is approximately 25 people strong and manages a $2 billion fund.
Ketterer stayed on with Lehman’s merchant banking group until 1998, when another business contact, John Howard, began considering how to build a merchant banking business for Bear Stearns, which Ketterer describes as “one of the last great franchises without a significant merchant banking platform.” Attracted by the prospect of building a business from scratch as opposed to reviving a business like Lehman’s, Ketterer joined Howard and his two-person team to create Bear Stearns Merchant Banking.
“What’s interesting is that from a cultural point of view and a franchise point of view, Bear is probably one of the best suited . . . because it is very entrepreneurial,” Ketterer says. “It still has a commission-based sales force. It still offers a real opportunity to let people come in and create their own franchises and develop them . . . [Bear Stearns’ clients] are very well suited as principal partners.”
The group, which originally invested the bank’s capital, is now 22 people strong with $1.5 billion under management. It is currently investing Bear Stearns Merchant Banking Partners II, the group’s first fund to be raised from outside investors, and has made 26 investments in its less than three-year existence.
Having worked in large institutions throughout her career, Ketterer says she feels she has the best of both worlds at Bear Stearns, which has an economic structure similar to an independent shop, coupled with the benefits of a well-established franchise. Unlike other in-house merchant banks, many of which drew their founders from other groups within the franchise, she says, all of the managing directors at Bear Stearns came from outside groups, including small independent firms, with an interest in building this merchant banking group. “I’ve enjoyed the fact that unlike some folks who work in the private equity business, I’ve been able to dabble in all aspects of it, from building the team and the strategy of the business, to how you develop policies to work within an institution that’s bringing us such a competitive advantage [i.e. proprietary deal flow], to capital raising and developing limited partner relationships,” Ketterer says. “We are in a position to create a legacy business.”
If building several thriving businesses isn’t enough to distinguish Ketterer’s career, her accomplishments as a woman in one of business’s last boys’ clubs should add further merit to her accomplishments. However, Ketterer is probably her worst critic. “My standards for myself are pretty high,” she says. “And as long as they are higher than the standards others put on me I guess I’ll continue to do okay.”
While recognizing that women may have it tougher in private equity and don’t always have the same access to the network, Ketterer remains undeterred. “Ever since I showed up for my first day at Oppenheimer, realizing Oh my goodness, I have this huge mountain to climb’, I guess I haven’t stopped,” she says.
Although Ketterer had difficulty finding another female professional in the business to look up to and emulate in her early years in private equity, she is thankful to have encountered male colleagues who could respect her achievements and abilities as a professional. Of Lehman’s Berger she says, “He truly is a great friend and values others according to their contributions and their merits . . . and that’s been a real driver [to succeed], especially for a woman.”
Similarly, she credits Bear Stearns’ Howard with giving her and other professionals “a great platform to stretch their wings and show what they can do.”
Most of all, Ketterer credits the educational infrastructure that instilled in her the belief that women could do anything. Her early desire to work hard – her first job, at her own request, was bagging groceries at age 10 – and her constant need and ability to take on a challenge no doubt also contributed to her successful undertakings.