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Financing the future must become a priority

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A Cambridge history graduate with a passion for art, promoter of education and its role in shaping and outlining destinies, Ion Florescu has, at first glance, the profile of a humanist. The Romanian who supports children's foundations and art festivals in Romania with donations and sponsorships is a majority shareholder (with a 55 percent stake) in the investment fund boasting the most spectacular and lucrative exits in the last 12 months. Reconstruction Capital 2 has cashed in a total of 35 million euros following the sale of its stake in dairy producer Albalact to Lactalis Group, and the sale of shares held in debt recovery firm Top Factoring to Intrum Justitia. The organic growth of the two companies, the well-thought-out exit timing and the high profile of the new investors (both Lactalis and Intrum Justitia are European leaders in their respective business sectors) are proof that RC2 had the know-how to develop an efficient management and direct investments in profitable activities, both for the companies and for the investment fund's shareholders.
The lesson to be learned is that culture and business can go hand in hand.
To learn about his views on the world of business (as it is perceived in Romania and in the UK) and about other activities close to his heart, we have talked with Ion Florescu, the man who has succeeded in maintaining a balance between business and art for the last 30 years.

Who is Ion Florescu and what are his main interests?

I am a normal person, but I have more numerous and diverse responsibilities. Born in a Romanian family, the Florescus, with a history dating back to the 14th century, I grew up with respect and love for a country, Romania, which I would only get to know better in my adult life. When I got here, I found roots I didn’t know I had. I learned the language and I decided to put my knowledge at the service of my country. I left the bank I was working for at the time and I started looking for solutions to get involved
in the reconstruction of Romania’s economy.
In 1995, I was CEO of Capital SA, the first investment bank in Romania. A while later,
with money from friends and business partners,
I set up the first investment fund dedicated
to Southeastern Europe, and particularly to Romania.      
That move brought about the first major responsibilities, both to the companies in which the fund had invested and to its shareholders. Being aware of my family’s role in the Romanian history, I feel that it is my duty to do more for this country, and not only in business. I can use my knowledge to support social projects and cultural events, whose contribution to the development of the community can be just as big. I have committed myself to following this path, and, together with my family, I have donated one of our properties to a foundation, whose mission is to offer care to children and adults suffering from serious diseases. I have also become involved in the administrative activities of the London parish of the Orthodox Church: around it, the Romanian community in the UK is growing and becoming more and more dynamic and in tune with the Romanian realities. Last but not least, for a number of years, we have offered sponsorship to arts in Romania, through Policolor’s social responsibility programs. We have always had a lot of talent deserving support in this area. I will continue to show support and interest for the Romanian art and culture, because they have a crucial role in a country full of spirit like Romania.      
 
What are your plans for the investment fund in which you hold a majority stake? What is next after Albalact and Top Factoring?
Investment funds have certain a life cycle, and in the case of RC2 we are now towards the end of the stage involving major investments. They were made before the onset of the economic crisis (before 2009) and it has been a challenge for us to ensure the performance of fund. We bought the stake in Albalact in 2006/2007, when the company was three or four times smaller than at the time of our exit (2016). Moreover, through efficient management, delivered by our partner, Paul Ciurtin, we succeeded in making the company market leader in its segment. The same happened with Top Factoring. The fund got involved in the debt collection firm one year after its creation, when it was still basically a startup. Through organic growth, the company reached an EBITA in excess of five million euros and a top position in the industry.     
I believe the positive exits were based on smart investment, good management, and good exit timing, both for the companies and for shareholders. Similarly, the recent decision to sell the extra land at Policolor was made as we’d noticed an increased interest for such investments. There are new plans for the future, but we need to decide at shareholding level which way to go. There are several sectors that we are particularly interested in.
 
Are you planning more investments in businesses in Romania?
RC2 is involved in three businesses with growth potential, and fresh funds have been earmarked for investment. I am referring to production and operational investments in the lacquer and paint industry, at Policolor Orgachim, market leader in Bulgaria and Romania. We have a similar approach in both markets, we have production operations in the two countries and we plan to expand our product portfolio in Romania. The new Policolor factory is going to be completed, delivering solutions for the residential, industrial and automotive segments. The project includes the construction of storage facilities, ensuring suitable storage for water-based and solvent-based products, as well as adequate delivery for distribution operations.
There is also the non-bank financial institution, whose shareholding structure we have entered recently. The company specializes in personal loans, and we aim at developing the business by creating a team of professionals and launching more lending products for consumers. In turn, the Zenith Hotel in Mamaia has been lined up for investment in refurbishing works.       
 
What is your perception of the Romanian economy based on your London and Bucharest perspective?
Romania’s economic growth is the highest in Europe, also placing it among the best performers globally. There has been a definite positive development and the only thing that could upset that trend is political blunders. The results we see today are based on sustained efforts over the last seven or eight years, focusing on fiscal prudence and correcting public deficit. However, the potential gains generated by the current economic context for the society and for the business community are dramatically affected by decisions such as the introduction of a split VAT payment, which is going to lead to major blockages, encouraging short-term consumption, rather than infrastructure development and investments in productivity growth.     
The upward economic trend is not the only positive aspect. We have also seen the beginning of a more balanced development among regions. While Timisoara, Cluj and Bucharest have been the most attractive urban areas for investors, now Iasi is the new point of interest. With its strong higher education hub, the city is attractive for IT investments, production development and call center operations. I would be very happy if we could generate a much-needed rebalancing in the Moldavia region.     
The recent years have put Romania on the map for development of strong businesses in IT and automotive parts manufacturing, and I believe that trend is going to continue. However, a sustainable growth rate cannot be ensured without added value, and that can only be achieved through investments in education. 
 
Why should Romania invest in education, when there are so many pressing sectors?
Any society, family, person has a chance to grow if they learn the value of education. I am sure that we won’t have opportunities as a society, unless we invest in education. What can be more pressing than our future, while
the present is still limited in development?   
I share my life between London and Bucharest, and I have seen how much the British respect education and how much they spend on it, not only at the public level, but also as individuals. Investing in children’s education is a priority, taking precedence over other aspects in life. People give up vacations, buying cars or other objects for their comfort, channeling the money into their children’s schools. With its tradition spanning hundreds of years, the British education system is widely appreciated.          
I think there are very many people in Romania who are interested in education and its role in their children’s life. However, no public investments are made in that area, not even in giving the right recognition to teachers. Look at how teachers are regarded in society and how much respect is given to their role, and you get a notion of the importance given to education. Romania has a duty to invest in
education in order to avoid wasting its great
talent and to secure its future in Europe.

How important is the EU now, after the UK’s Brexit vote?
I could say that the EU is feeling better now, after the elections in the Netherlands and France, even though AfD’s entrance into parliament in Germany is regarded as a bad sign. Still, the EU is again an area of stability, if we compare it to Trump’s presidency in America and Erdogan’s rule in Turkey.
The Union’s problems are still there however. There aren’t solutions to every problem for the economies in southern Europe, which joined the eurozone, with a banking sector that has not yet fully recovered (the level of NPLs holds Europe in the risk zone). The referendum in Catalonia, which is also economically motivated, mirrors some of the current problems that the EU has to deal with.    

The interview is also available in our print edition of Business Arena.

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