Inside Housing Board Member Briefing: mergers

GreenSquareAccord was formed through the merger of 12,000-home GreenSquare and 13,000-home Accord, making it one of the closest to a merger of equals in the sector in recent years. 

Robin Bailey, now chair of the merged organisation and previously chair of GreenSquare, tells Inside Housing the first part of the process was to develop a clear idea of why the organisation wanted to merge. 

“The board was pretty much split on its longer-term strategy about mergers,” he says. “We discussed it at an away day, and ultimately decided that we weren’t big enough, given the environment that we’re operating in, to keep providing the type of service for our tenants that we felt they deserved.”

David Williams, a partner at Campbell Tickell who leads the consultancy’s work on mergers, says early clarity at board level about what the organisation wants to achieve is critical.

“The first thing I always say to a board is: be clear on why you’re doing it. It’s amazing the number of boards that don’t engage that subject properly,” he says. 

Currently, many of the mergers going through the system are about the operating environment: the well-discussed pile up of financial pressures, from building safety, to disrepair, to rising interest rates. These create costs which may sink a smaller organisation. But being a bit larger can provide more financial headroom. 

“The word that people keep using is ‘resilience’,” says Mr Williams. “Many organisations out there are reaching a point where they’ve tried to manage their business to cope, but increasingly recognise that over the next three to five years, the future doesn’t look particularly rosy and they’re unable to achieve their objectives.”

Finding a partner

If a board agrees this is what its organisation is facing, and it needs to merge to get out of it, the next step is finding a suitable partner. The sector often talks about organisations being a good cultural fit for each other, but what does this actually mean? 

“In one sense, any housing association is a good cultural fit for another because fundamentally we provide the same core service,” says Ruth Cooke, chief executive of GreenSquareAccord and the former chief executive of GreenSquare. 

“But it boils down to understanding what the priorities and aspirations of each organisation are. One of the things that came out really quickly from the very early discussions for our merger was this absolute focus on it being about making things better for customers with a particular focus on existing customers. Otherwise, it’s just about getting larger with all the risks that brings in terms of more remoteness without the benefit.” 

As the merger process starts to move forwards, there will be challenges. Which housing management system will be adopted? Which finance system? Who will be on the new board and executive team? Where will the new head office and customer contact centre be located?

“The best boards, I think, treat those obstacles as obstacles to get over and find a solution to, not irritants that assume an importance and scale that means that the merger doesn’t go ahead,” says Mr Williams. 

To achieve this, forming strong relationships between the two boards is crucial. 

“If you’re doing a merger or an acquisition in the commercial sector, you offer your money, you shake hands, and it is pretty much a done deal,” adds Mr Williams. 

“But in our sector, it’s very much about relationship and people, and if the people don’t get along, that is why the process fails. It’s rarely about the TUPE process, or treasury or organisational structure. Very few organisations have a technical problem that means the merger can’t proceed. The rest of it is all about the relationship, partnership and trust between the people involved.”

A tricky balancing act for board members is the flip that takes place after the merger is completed. “Board members have to tread quite a careful path,” says Ms Cook. “Because right up to one minute to midnight, the day before merger, your duty is to do what’s best for your existing customers and your existing organisation and then you get to one minute past midnight, and suddenly, you’ve got a duty to a whole wider organisation.” 

A new board will be formed for the new organisations with some representation from both previous businesses in almost all cases. It is important to do make the decision about exactly who this will be early in the process. 

For GreenSquareAccord, the post-merger period has been challenging. After the deal went through, a number of health and safety breaches on the Accord-side of the business led to a regulatory downgrade.

Mr Bailey reflects that more thorough interrogation of data, rather than a reliance on Accord’s top regulatory grading and the assurance of its leadership, might have brought this to light. 

“If we had our time again, data interrogation and observation would have been a much higher priority rather than relying on the voice of individuals,” he says. “You need to absolutely corroborate what they’re saying with proper data analysis.”