Ilıcak's incredible 5 year plan

Erman Ilıcak, who is one of a new generation of entrepreneurs in Turkey, began his business career at Enka after he finished university. The experience he gained there enabled him later to establish his own business. He continued by focusing on growth and making executives into partners. He entered fields such as construction, the building of hospitals, shopping malls and energy. He still applies a strategy of “We shall not be part of any company that is not one of the top three.” He says that they will continue to grow in shopping malls, energy and hotels and by buying companies. “We shall grow by 33 percent a year for the next five years,” he adds. ‘We are planning investments of $12 billion.” We spoke with Rönesans Board Chair Erman Ilıcak about the past, present and future of his companies as they rise into the giants’ league.

Capital: You have created a $2 billion company from nothing in just 20 years. Could you talk about the management structure of the company?
- Our strategy is based on our choice of working colleagues and the development of an approach that treats them in a different manner. At the beginning, we were placing advertisements in the newspapers and seeking experienced personnel. Then we found some young colleagues with 1-2 years’ experience. We managed to get hold of a generation which had been well raised. Later we moved to a profitsharing system. Today, 25 of our colleagues work like this. The final decision is mine, but we have a decision-making mechanism. The biggest problem in our sector is losing well-trained personnel. We have grown by employing very valuable personnel. Alarko’s withdrawal from Russia in 1998 was a great opportunity for us.

Capital: What criteria do you use to choose the countries in which you invest? What type of business model do you have?
- We have had a lot of plans that didn’t work out. We work in the most risky countries in the world. While doing this we learned which markets we should focus on. We focused mostly on developing countries where there is little competition, which are rich in natural resources and most of which spend money on infrastructure development. We have five main countries. They are Iraq, Syria, Turkmenistan, Turkey and Russia. In other countries, we have either reduced our operations or withdrawn completely.

We have changed the old model of contracting. We have done the opposite of whatever they do. Every country is run from inside itself. It was not like this in the past. Projects would be exported. A coordinator would be appointed there and would follow the business. We don’t work like this any more. We have removed the central management. We have companies and managing partners there. It is they who manage the business. We just provide support.

Capital: How large has your volume of business grown? What are your future targets?
- We closed 2012 with a turnover of approximately $2 billion. We are targeting $3 billion this year. We are planning to grow by 33 percent every year. We are aiming to have a turnover of approximately $25 billion within five years. We shall have $10 billion worth of domestic contracting and $15 billion abroad. We need to complete a total of $25 billion worth of business within five years. In order to achieve all of this, we have investment plans of $12 billion.~
$2 billion of this will be in Russia and $10 billion in Turkey. According to the data for 2012, we rank 81st in the world in contracting. We shall rank higher this year. Our markets are growing and we are also growing.

Capital: How are you positioned in Russia?
- We are among the top ten companies in Russia as a whole. In the 220 construction companies in the world, there are 32 major Turkish companies and we are one of them. But our total is still less than the largest in France or Germany. All of the Turkish companies have grown organically. They have developed through their own possibilities. But the others grew through acquisitions. There are 1,700 different firms in the largest company in the world. The top ten all grew through acquisitions.

Capital: Five years ago you bought a five percent stake in the A.PORR Aktiengesellschaft Austria company. Have you achieved what you expected from this partnership?
- We bought 10.2 percent of the second largest company in Austria. We appointed a member of the company’s board as CEO. But it wasn’t a successful partnership. We had 10 percent of it. Our share has now fallen to 7.5 percent. Our relationship is continuing. In fact, we learned a lot of things from them but we could not do what we had planned. We had been intending to start off with 10 percent and then raise it to 51 percent. But it did not happen. Now we are looking at companies where we can buy 100 percent of the shares. We have identified a few companies and we are looking at them.

Capital: Could you talk about your investments in Turkey?
- We are continuing to build an office building in Istanbul with 200,000 square metres of rentable space. We shall have the biggest office stock. We have made the biggest shopping mall stock. We shall complete it by the end of 2014. We shall rent it out. When we look at hospitals, we have taken 40 percent of the total put out to tender with 5,500 beds. We have developed a $4 billion future investment plan. We first plan our investment homework very well. Over the next five years we shall have $2 billion worth of business from the land we have purchased. At the moment, we have 13 shopping malls. We are the largest in Turkey in terms of square metres and rental income. We have many projects in hand that we shall start. We have major projects in Istanbul and Izmir. We shall build a shopping mall in Van. We shall build a shopping mall in every city that needs one. We want to invest in every city whose economy rests on sound foundations. These investments change the appearance of a city. Istanbul is more profitable but we regard Anatolia as a social responsibility.

Capital: Could you talk about your investments in energy and housing?
- We are currently very small in energy. But with the licenses that we have acquired we shall realize projects that will take us to 4,000 megawatts. Later come obtaining the permits and starting the project. We don’t want to enter any area where we don’t see ourselves as being among the top three. We don’t want to be a small player.~
We don’t want to get involved in housing. Our business is commercial real estate. We are expecting to grow by 40 percent in 2013. Most of the growth will be in Russia. The two countries in which we are investing are Russia and Turkey.

Capital: Why don’t you bid for state tenders?
-We are not so competitive in infrastructure. We don’t get involved because we are not ready to compete with other companies. There are 40 projects that we have prepared ourselves. We are trying to realize them.