Five months after Dain Rauscher Inc. purchased the public finance practice of Artemis Capital Group Inc., only about a third of the former Artemis bankers remain at the combined entity.
But Dain officials say they were prepared for some attrition, and have held on to the people they wanted most. In short, they say the departures have not hindered the firm's ability to pursue the strategy it outlined when it acquired Artemis.
Of the approximately 15 public finance professionals who received offers of employment from Dain after the purchase of Artemis, five remain. They include founding partners Robin L. Wiessmann and Aimee S. Brown, who have joined Dain's senior management committee and lead the East and West Coast public finance practices, respectively, while chasing down deals of their own.
"Do I wish I had a couple of the other bankers still? Yes. But the vast majority of the senior people are here," said Nelson D. Civello, president of Dain Rauscher's fixed-income capital markets group.
"The key was the partners," he said. "They were the most senior bankers in the firm. They are a big reason we did the deal."
With the purchase of Artemis, Dain - which generates the greatest part of its municipal revenues from sales commissions - had hoped to significantly increase its access to co-managed deals, particularly on the coasts, where Artemis had relationships with major issuers such as New York City, California, the Long Island Power Authority, and Dade County, Fla.
"We have gotten everything we said we wanted," Civello said, noting that the majority of Artemis' issuer clients are doing business with Dain.
"There were a couple of clients that didn't come over because of the loss of the minority status, but the majority have been very loyal to the relationships that were built over the years," he said.
As proof of its success, Dain touts its first-quarter figures for negotiated underwriting.
During the first quarter of 1999, Dain ranked ninth among underwriters nationwide in the negotiated arena, acting as senior or co-manager on 103 issues worth $7.17 billion, according to Securities Data Co. During the first quarter of 1998, prior to the acquisition, Dain ranked 26th, handling 115 issues totalling just $2.24 billion.
That jump puts Dain ahead of Wall Street's Morgan Stanley Dean Witter, J.P. Morgan & Co., and Prudential Securities Inc., firms it trailed last year.
In addition, according to Dain's own figures, commissions from the sale of new issues to investors have jumped 20% in the first quarter from one year ago, even as overall municipal issuance has slowed.
Artemis public finance staffers remaining at Dain are bankers Rita J. Sallis, Thomas A. Berger, and Elizabeth A. White, the former chief financial officer at Artemis who has joined Dain's banking team.
All are in the New York City office, the only Artemis location besides San Francisco that Dain intended to maintain when it structured the acquisition, according to Civello. Bankers in other offices were asked to relocate, a fact that may have contributed to their decision to seek employment elsewhere, he speculated.
"We did not have an interest in having a Washington office or a San Diego office," Civello said, referring to two of Artemis' smaller satellites.
For their part, several of the bankers who have left Dain cited not particularly attractive compensation packages as one of the primary reasons for their departure. But the sense that they were not a valued part of the deal also contributed to their decision, several said.
"It just became pretty clear, pretty fast once we got over there that the writing was not on the wall for anyone except Aimee and Robin," said one former Artemis banker.
"A lot of people that had been (at Artemis) almost from the beginning felt like they had put in a lot of sweat equity and would have expected to get more compensation than they did."
Through a company spokesperson, Wiessmann and Brown declined to be interviewed for this article.
Most of those bankers who either did not accept Dain's original offer, or departed after bonuses were distributed in February, have since resurfaced at other firms.
Washington, D.C.-based banker Jonathan F. Kirn and analyst Jennifer Nagel have helped to establish a banking presence in the district for Siebert, Brandford, Shank & Co.
In San Diego, David L. Malcolm is currently doing consulting work, according to sources. Malcolm could not be reached for comment.
From the San Francisco office, Robert K. Hedrick Jr. has taken the helm of the investment banking effort of Education Securities Inc., a Virginia- based Sallie Mae subsidiary specializing in education financing, and S. Gian Petersen has joined ESI as assistant director of investment banking.
P. Scott Nagelson, a banking generalist with experience in water and sewer as well as airport financings, has gone to Merrill Lynch & Co. in San Francisco.
In New York, banker Rommel A. Marseille is now a vice president at LIATI Group LLC, a New York-based investment banking and financial services firm with an emphasis on clients in the public sector.
Marlon M. Quan, who also worked out of New York, confirmed he is no longer with Dain, but declined to comment further.
Of those that chose not to join Dain, Courtney C. Shea is now a managing director with Salomon Smith Barney Inc. in Chicago and Margaret Lloyd has left the industry, according to sources. She could not be reached for comment.
Lauren A. Smith, a securities industry analyst at Putnam, Lovell, de Guardiola & Thornton, said that while it is too early to say with certainty whether the purchase is a success, the strategy makes sense and the attrition is typical of any merger.
"There's undoubtedly going to be dislocation," she said "Some people sign on; others choose not to."
In addition, Smith suggested that Dain's large network of bankers may have made some of Artemis' lower-level public finance professionals less essential.
Dain "had to sift through and if there was anyone marginal or two people covering the same territories or what have you, you have to make choices," she said. "That's natural."
To fill any leaks that may have been left by departing staffers, Dain is shuffling its own bankers and adding to its ranks. Civello said the firm has recently made three additions as part of a larger hiring drive, but declined to discuss details at this point.
"We are continuing to restaff where necessary," Civello said. "We are very much on a growth strategy for public finance."
Kenneth Heaton contributed to this article.
