Enterprise Investors, the largest private equity group in the CEE, has been investing in the region since 1990. Private equity funds managed by Enterprise have invested $763 million in 94 companies across a broad range of business sectors in Poland, Slovakia, and Bulgaria, and its first foray into Romania was in 1999 when, as part of a consortium, it bought a stake in Orange Romania. Its investment in Credisson International, Romania’s leading non-bank consumer finance company, into which it ploughed 9 million euros for a 41 per cent stake, is its second investment here.

A meeting of minds: Florin Andronescu with Dariusz Pronczuk and Jacek Siwicki.

Jacek Siwicki, Managing Partner, Enterprise Investors

Vivid: First of all, what impact did the success of Orange here influence the way you perceive Romania? Are you looking to divest yourselves from that investment?
Jacek Siwicki: The investment in Orange Romania created an opportunity for a thorough review of the macroeconomic environment in the country. We also had a first-hand experience that a company with the right product or service, properly tailored for the local consumers, can unleash substantial demand and become extremely successful.

We are always open to discuss an opportunity to exit from any investment, in this case either through a trade sale to our partners France Telecom or through flotation on the stock market, if the valuation is attractive. However, since the performance of the business is excellent, we are happy to remain investors of Orange Romania for some time.

To what extent did you keep your eye on Romania’s credit ratings by Standard & Poor’s, and Moody’s?
Credit ratings are only a small part of our macroeconomic due diligence, although a very useful one. We analysed which private companies could create potential investment opportunities for us. We reviewed the activities of other private equity groups active in Romania, their investment portfolios and track record of exits. We also reviewed the development of the capital markets in Romania from the point of view of future exits from our own investments.

You obviously do a thorough due diligence on any potential investment, and you had your initial meeting with Florin Andronescu in 2001. What attracted you to Credisson in the first place?
We believed that we can use our extensive experience in consumer finance to repeat the success of Lukas, a Polish consumer loans company. Therefore after reviewing the consumer finance market in Romania we concluded that Credisson has the right team led by a very dynamic and visionary entrepreneur and has the enormous potential to grow into an unquestionable market leader.

Will you be active in the day-to-day management of Credisson?
We are active members of the Supervisory Board, but we avoid getting involved in day-to-day operations of our portfolio companies. My partner Dariusz Pronczuk, who has four years of experience in consumer finance in Poland, will try to help strengthen the management team and transfer our knowledge of the industry.

Do you have any plans to effectively turn Credisson into a bank, as you did with Lukas?
Building Lukas Bank was part of the success in that investment, as the company was able to finance the consumer loans from the bank’s deposits and was no longer an intermediary, lending someone else’s money. We will consider whether it is possible to follow the same strategy in Credisson, but we believe that the company will be very successful also in the current business model.

How long typically do you hold on to an investment, and when it comes to exiting, who might buy your stake?
Our typical holding period is 3-7 years and we would consider an exit both through a trade sale to an industry player as well as through flotation on the stock market. For example, IPOs represent half of our exits in Poland.

It follows that an increased demand for something will lead to a need to provide financing of it. Did a similar pattern emerge in Poland in the white goods and household appliances sector?
The increased consumer spending in Poland, which started in the mid-1990s and is similar to what we observe in Romania now, generated a significant increase of consumer loans to finance purchases of cars, consumer electronics, white goods and household appliances. As a result, consumer loans in Poland more than doubled from $1.8 billion in 1993 to $4.2 billion in 1996.

In what ways is Romania’s economy comparable to Poland’s? How many years do you think Romania is behind Poland in terms of economic development and corporate governance?
It is very difficult to say where Romania is now in comparison to Poland – although the differences in the main macroeconomic indicators clearly indicate that there is a large distance between the two economies. We believe that certain patterns in the economic development of these two countries may be repeated and Poland is a useful reference point or benchmark. However, our experience tells us that it is impossible to simply take a proven business model from Poland and replicate it in Romania without any adjustments for differences between the two markets.

You do have more financing available. What other sectors in Romania do you see as attractive to the point that you might consider an investment?
We are focusing on industries where we have experience from previous investments, such as financial services, consumer goods, retail, manufacturing, telecom and IT. We would like to be not only a financial institution, but a business partner who is able to add value and provide our contacts in Poland as a useful reference for solving practical problems in running the company.

Florin Andronescu, founder of Credisson International and founder of Flanco

Vivid: Now that you have this major injection of cash, how do you intend to spend it? Is it likely that there will be an increase in the number of outlets of Credisson?
Florin Andronescu: The Polish investment will help Credisson reach its ambitious development plan, which includes extending its retailer network and an internal IT restructuring. We will also hope to attract more funding to enable Credisson to act as a principle in lending. Credisson now has a presence in every city of 50,000 or more residents. In all, there are 166 credit desks already, with 30 in Bucharest alone, and more will open soon.

Key to your success has been your ability to attract outside funding. What advice do you have for other budding entrepreneurs, whose main obstacle is a lack of funding? How might they attract the likes of Enterprise Investors?
You have to begin with a concept that is viable and credible, and then transform it into something that is profitable and successful. Your accounting records must be transparent and understandable to any foreigner, so IAS accounting is a must. And building a very professional management team is very important too.

I’m an average home-owning family man, earning an average wage. I want to buy a new fridge costing $600. Would I qualify for a loan, and if so, what are the very best terms I could get through Credisson?
You would definitely qualify. The very best terms we recommend are those of Credisson Easy product, a simple solution which cuts down on the typical bureaucracy and tedium of involved with normal loan applications. But we will always work with a customer to tailor-make a solution in terms of the right tenor and instalment size that suits his circumstances. On-the-spot appraisals are available, and tenors are available from 6 to 60 months, depending on the product that is being bought. Interest charged varies from 20 to 27 per cent, and we also charge a 9 per cent commission fee.

How might it be better to borrow through Credisson than through a bank?
Credisson is a consumer finance specialist. Through Credisson the customer has access to many banks products,or as a principal Credisson is much more flexible and creative for the product terms – for example we can offer a generous grace period, no commissions, no interest, and no downpayment.

Are Credisson clients obligated to purchase goods through Flanco, or may they buy at companies that compete with Flanco?
No, customers may purchase products wherever a Credisson desk is located. That includes retail chains that compete with Flanco. An example is Cosmo, Romania’s fourth largest retailer of household products, in which Credisson desks will soon be established.

To what extent is Credisson International 'international'? Are there plans to expand Credisson into other countries?
Actually the word ‘International’ comes about because of the Romanian trade practices law that says you need a word like ‘International’, or ‘Com’ etc if the company does not have an affiliate outside the country. We do not have an affiliate outside Romania but who is to say that we won’t expand internationally, one day.

Are there plans to loan for reasons besides purchases of home appliances, such as home loans, for instance?
Basically we need to understand the risks involved in lending for other uses. Right now we understand the consumer loans market very well, so there is no limit in terms of lending for purchasers of consumer products. But if we were to be approached for mortgages or car loans we would first have to fully understand the risks that are involved.