When small meets large – making a merger work for both parties

The opportunities we have explored either consolidated our geographical footprint, or helped us grow incrementally into adjoining areas where we can add value.

In December 2022, we welcomed 54North Homes to the Karbon Group as a subsidiary. It has 4,000 homes and was formed through a merger between Leeds and Yorkshire Housing Association and York Housing Association (YHA). This merger helped strengthen Karbon’s presence in Yorkshire and our ability to have a positive impact on customers and communities.

A transfer of 439 homes from South Tyneside Housing Ventures Trust in July 2023 gave us greater capacity to invest in homes there.

And in June, we welcomed Leazes Homes to the group as a subsidiary, a 759-homes organisation in Newcastle upon Tyne.

Karbon’s approach to mergers and acquisitions (M&A) is different. We look for opportunities that build our strength and capabilities and improve the services and support we offer. We want our growth to add value and help strengthen our position to do more of what we care about.

“We look for opportunities that build our strength and capabilities and improve the services and support we offer. We want our growth to add value and help strengthen our position to do more of what we care about”

We’ve developed quite an innovative approach to partnering with smaller providers, which bring a plethora of benefits, including strong connections with their communities and a clear understanding of local challenges and opportunities.

When YHA initially joined the group in 2017, we recognised the benefits of retaining its identity and continuing its day-to-day housing and support services in York. Having the financial and operational support of a larger organisation behind the scenes only strengthened the organisation. Karbon took on business functions such as finance, HR and development, giving the YHA team space to concentrate on delivering the best-quality services and support.

The same goes for Byker Community Trust, which owned and managed the Byker estate in Newcastle. It was a stock transfer, but we decided to retain the brand, its values, ways of working, colleagues and office base, again to strengthen what was already working so well.

With the pressures of higher inflation, increasing building costs, risk of cybercrime and additional regulatory requirements, joining a group like Karbon brings a host of benefits to smaller providers seeking secure resourcing and financing.

Through Karbon, they can benefit from our systems for key business functions. For example, licensing for online tools and software can be quite expensive, but our scale makes them better value for money.

From a development and asset management perspective, there’s access to economies of scale, VAT efficiencies and savings. They can access funding more easily through our strategic partnership with Homes England and links to major developers and local authorities.

For 54North, the economic and operating environment was getting more difficult to manage, but the biggest draw was access to Karbon’s additional customer support services. We had limited capacity in services such as employability support and debt advice, and trying to deliver these through partnerships had proven not to allow us to do enough for customers. Joining Karbon has enabled us to introduce a full-time specialist money-matters caseworker, and our customers can access services like Karbon’s furniture rental scheme.

“As a standalone we simply would not have had the resources to invest so much in cyber security. The merger was the right thing to explore”

We have introduced new in-house functions, including a compliance team, and have hugely benefitted from the group’s business support functions like ICT. As a standalone, we simply would not have had the resources to invest so much in cyber security. The merger was the right thing to explore. We’re now able to do more and better.

What is needed to make this approach to M&A a success? The key is mutual trust and alignment of goals. This has to go beyond financial benefits and encompass a positive culture, a commitment to employee well-being and openness to innovation. Customer and colleague consultation is vital, as M&A activity is for their benefit, and it’s imperative that they can share their views and remain at the heart of our work.

Karbon provides support to other not-for-profit organisations and housing associations through our cost-sharing vehicle (CSV) Karbon Solutions. Four partners have joined in the past 18 months, receiving various tenancy and property management services. We’re now delivering services to over 9,000 of our partners’ homes. Our CSV partners benefit from VAT savings on labour and have reported increases in customer satisfaction since joining. The CSV also brings us an informal network of like-minded partners who share knowledge, experience and expertise.

Annaliese Rogers, head of the housing practice, Odgers Interim; Scott Martin, executive director of resources, Karbon Homes; and Mark Pearson, managing director, 54North Homes