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Anne CostainMake sure you merge for the right reasons
As associations look to merger activity, Anne Costain of Radian gives some tips on how to ensure plans are successful
Take a good look in the mirror first
As the product of a three-way merger, and having recently explored a partnership opportunity with another housing association, we’ve seen the benefits that merging can have on an organisation.
Regardless of whether you merge or not, the vital due diligence that is required – looking at your partner organisation, and in turn looking at yourself – is an extremely helpful exercise.
Looking at the synergies between the organisations, their structures plus your strengths and weaknesses is beneficial because it allows you to learn from others, even if you are not on the merger path at this point.
And if you don’t have any intention to merge your organisation, reviewing your processes and your business model, possibly with an external consultant or someone within the business who is new at a fairly senior level, is extremely helpful.
Do it for the right reasons
There are many things to consider before a merger.
You look at your culture, your people, the treasury side of things, as well as your strategy and the IT systems that you have.
“You want a strong sense of purpose and a good executive team.”
From an organisational point of view you want a strong sense of purpose and a good executive team if you are going to merge.
But most importantly of all, you must ask if it is the most effective way of delivering more for your residents and tenants.
If you believe you can deliver savings and efficiencies regardless, then mergers are not the only way.
Is bigger always better?
Government policy is partly what has led to more housing associations merging, but if you take that out of the equation much of it comes down to economies of scale. If you can become a specialist in a certain area by being a larger organisation, then you are spreading that cost across a greater number of homes.
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There’s also an expectation that if you pick the right geographic neighbour then you should improve your management costs.
This could be because you can consolidate offices and housing and asset management, looking at greater investment in technology to reduce your costs.
With larger budgets you can potentially look at more innovative solutions, whilst you also have greater access to people who are specialists in certain areas. A larger organisation also has a greater opportunity to engage and influence government policy and other stakeholders.
Don’t forget your purpose
Among the many benefits of merging, increasing income and increasing housing delivery is not more important than your social purpose.
Crucially, if a merger is done well it should improve your social purpose.
For this to happen, you need two like-minded organisations that can look at amalgamated business plans and put their social purpose at the forefront of decision making.
If the organisations do not share cultures and visions then your social purpose will be at risk.
It’s not the only way
The sector expects that there will be more merger activity, but there will always be a place for smaller organisations.
This is because they can specialise to meet certain local needs and because they do not face the same regulation that bigger organisations do.
“If a merger is done well it should improve your social purpose.”
Mergers can never be at the expense of the connections you have with your tenants and you must conduct due diligence on yourself to be clear about how and why you’ve got to the stage of merging.
You should be merging because you want to do more of the right things, not just because it might be the easier thing to do.
Anne Costain, director of finance, Radian
