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10/01/1991 | In the News
Four Capitalize On Corporate Independence (Hartford Courant)

By MARY AGNES CAREY; Courant Staff Writer, reprinted from The Hartford Courant, October 1, 1991

After five years of weighing risks that other people take, four former employees of Aetna Financial Services Inc. are taking a big risk themselves. They left the Aetna Life & Casualty Co. subsidiary to form their own investment banking firm.

Ironwood Capital Partners Ltd. structures, then places, corporate debt securities with institutional investors, primarily banks and insurance companies. Part of Ironwood’s work includes packaging large groups of loans or leases and selling them to investors.

“We arrange loans for companies, that’s what we do,” said David Evans Katz, senior vice president of Ironwood.

Ironwood opened July 1. In August, the company sealed its first deal, the $40 million sale of 6,000 leases for 10 different types of office equipment, such as photocopiers and facsimile machines.

Since then, business has been good.

“We’re having a hard time dealing with all the business we’re getting,” said Marc A. Reich, Ironwood president.

He estimated the company will complete eight to 10 transactions this year valued at a total of $400 million. Of that, Ironwood will get about 1 percent, or $4 million.

The company already has five clients on board from deals that had begun at Aetna but that the partners were allowed to take with them, Katz said.

Ironwood’s founders said they plan to focus on the same deals they pursued at Aetna — transactions of $100 million or less, the deals that large Wall Street firms ignore.

Walking away from the security and structure of the corporate world wasn’t a snap decision for Reich, 43, Katz, 39, and their partners, David P. Olson, 39, and Carolyn C. Galiette, 31. They worked together in the investment banking group at Aetna Financial Services.

The four first discussed breaking away from Aetna two years ago, but dismissed the idea almost immediately.

“It was kind of like a dream Marc and I had,” Katz said. “We had had a very good year,” he said, referring to the $250 million in deals the investment banking group closed that year for Aetna

Financial Services.

“We thought, `Gee, we could be making this money,’ ” Katz said. “But we were concerned. We needed more clients and we needed to be known more in the marketplace, not just as [part of] Aetna.” Besides, Aetna allowed Reich, Katz, Galiette and Olson to operate independently and they often made deals with companies other than Aetna.

“Within a very staid organization, we were given a lot of latitude,” Galiette said.

The co-workers discussed the idea again last fall when Aetna announced it planned to cut 2,600 jobs from its payroll. They feared their jobs could be among those.

Their discussions were casual. They became serious at 3:30 p.m. on April 5.

That’s when Aetna officials told the four investment bankers that the company planned to phase out its investment banking business.

“We all remember that date,” Olson said, sighing at the memory.

Reich said Aetna’s announcement helped the co-workers decide to go out on their own. “We’d been employees all our working lives. Here was a chance to run our own company,” he said.

The foursome cut a deal with Aetna: They would wind up Aetna’s investment banking business, then go off and start their own.

Aetna also agreed to give Reich, Olson, Galiette and Katz the computers, software and client files they had used at Aetna to help establish Ironwood’s client base.

Of the seven staffers in Aetna’s investment banking operation, six are at Ironwood; the others are secretaries Marge Hudon and Maria Steffano. A fifth Aetna investment banker transferred to Atlanta.

So with computers and files, plus a combined startup investment of $100,000, the four were ready for their new adventure.

But before Ironwood Capital could open its doors, it had to figure out where the doors would be.

Although Hartford has a glut of unrented office space, the partners had to deal with bankruptcy trustees almost as much as landlords since so many developers had gone bust.

“There’s a lot of space you can’t get your hands on,” Galiette said.

They finally negotiated a deal to move into an office at 100 Allyn St., setting up shop on the second floor with rented furniture. But there were other hassles, Galiette said.

Which make of copy machine would they buy? How would they set up their payroll system? Which phone company would they use? Which postage meter would they buy? What travel agency would they book through? Since they had always worked for companies, they never had to handle such matters, Galiette said. “Those matters took a lot more time than we realized they would,” she said.

Once the office was rolling, the partners had to worry about another matter — negotiating their first deal. Investment banking is a business where courting clients can take a year or longer, Reich said.

And since most banks are taking longer these days on every transaction — including writing letters of credit that are a part of Ironwood’s business — the company’s deal-making was slowed, Reich said.

Negotiations for their first deal — the $40 million

transaction arranged for Copelco Credit Corp. of Upper Saddle River, N.J. — had begun while the partners worked at Aetna. But it wasn’t completed until August.

“For the first six weeks, until that deal closed, we were all a bit nervous,” Galiette said.

The nerves have calmed a bit since then, because the four partners realize they can function outside Aetna, Katz said.

“We worried, at first, how we would do without the Aetna name. But now we realize it was what we did and how we did it,” he said