Making mergers happen
Ten top tips for a successful outcome
Partner, Campbell Tickell
Senior Consultant, Campbell Tickell
Issue 64 | February 2023
It’s no secret that housing providers are facing an unprecedented degree of challenge from their operating environment. The pressure on the delivery of new homes remains strong. At the same time, the sector is facing multiple shocks, which have eroded financial and organisational resilience and increased the challenge set by government to boost housing supply.
Consequently, housing providers have reset their corporate and financial plans, building in additional provision to meet new commitments, reviewing their financial Golden Rules to ensure there is reserved capacity to absorb shocks, and, as a result, ambitious development intentions have either been calmed or in some cases ‘strategically paused’. Merger is seen as one solution to re-capture resilience using the combination of scale and efficiency to either restore, and ideally exceed over time, previous ambition.
Those expectations reflect our own view and experiences of the market. We are observing a new peak of interest in merger activity from across the sector, with providers of all sizes and locations looking to reach for resilience through scale as a means of providing a more secure future.
For those considering a merger as an option, here are our top tips to ensure success in what can be a difficult and challenging strategy.
“Approach discussions with a potential partner with an open mind. You never know where a conversation might take you!”
Prepare your organisation fully. Spend time with your board to understand the why, how, and what of any proposed partnership.
How quickly do you want a partnership to happen? Do you want to be proactive, test the market and search out a partner? Are you opportunistic, waiting for the right opportunity to arise? Or are you reactive, waiting to be courted by others?
Be curious. Approach discussions with a potential partner with an open mind. You never know where a conversation might take you!
Avoid pushing what you think are USPs. You may not be as unique as you think!
Don’t underestimate resource requirements. Understand the required business effort to deliver a partnership, especially if your business-as-usual requirements are challenging.
Be prepared to say no. Sometimes it’s easier to carry on with discussions when it would be better for all to walk away. Be ready to make that difficult call.
Integration is harder than you think. The challenge of integration shouldn’t be underestimated. Getting it right can be the difference in capturing ambition or causing deep frustration. Start integration conversations early, give it appropriate focus and ensure it is appropriately resourced with colleagues who know the territory.
Build trust. Mergers fail if trust and confidence disappear. Failed mergers because of technical points like pensions or funding arrangements are far rarer than those caused by a breakdown of relationships. Behaviours are very important.
Understand pace. As you develop your plans, make sure the pace is comfortable for both parties and that no one feels pressured or rushed into decisions.
Be honest with one another. An open and transparent dialogue, warts and all, is highly important and offers the best route to success.
“As you develop your plans, make sure the pace is comfortable for both parties and that no one feels pressured or rushed into decisions.”
And finally – and perhaps most importantly – have as few lines in the sand as you can, and be very clear about them from the start. Try not to make it about who gets which job or about what the combined outfit is to be called.
Over the past few years Campbell Tickell has supported many mergers, most recently the ‘mega merger’ between Southern Housing and Optivo (Southern Housing), and a three-way merger between York Housing Association and Leeds and Yorkshire Housing Association to create 54North Homes, a new subsidiary of Karbon Homes.
If you would like to discuss how we can help you form a new partnership, please contact David Williams (lead partner for growth and acquisition).
“Have as few lines in the sand as you can, and be very clear about them from the start. Try not to make it about who gets which job or about what the combined outfit is to be called.”