A matter of fit and focus

Peter McCormack

Peter McCormack, chief executive of Derwent Living discusses joining the Places for People Group, the challenges and opportunities of a new partnership, and how a shared vision and focus were key drivers for both organisations throughout the process. 

News of 'mega mergers' and 'will they/won't they' deals frequently hit headlines throughout last year. It seemed barely a week went by without fresh comment and speculation in the trade press or via Twitter.

This 'merger mania', as one commentator called it, is a natural reaction to the prevailing economics that underpin a sector caught in the shifting sands of housing policy. The scars left on balance sheets from years of austerity have clearly been a determining factor in many organisations' merger plans. It's no secret that the four year rent reduction and the accompanying £3.9 billion of lost revenue for housing associations, caused many to consider whether strength in numbers provided the solution.

The notion that 'bigger is better' is one of those ideas that bounces around boardrooms when considering a merger. However it's important to remember that an increase in size alone won't deliver long-term benefit to organisations, their customers and the staff providing front line services.

Much more important is how potential partners will fit together and complement one another's business. Fit - or lack of it - has been attributed to many of the high profile failures we've seen in recent times.  It demonstrates that a sector which to outsiders can look conservative and staid, is in fact dynamic and extremely nuanced. When fundamental differences in approach arise, it can mean a swift and often very public conclusion to negotiations.

When Derwent Living took the decision to enter partnership discussions with Places for People in the summer, organisational fit was a key part of early conversations. The business had been looking at potential mergers for two years, and had a clear vision of what an ideal partner would look like. As talks progressed, it was clear that there was significant common ground, particularly around our approaches and where we believed our focus should lie. As we explored how the two organisations could complement one another, it struck me just how similar the two businesses were - albeit on a very different scale. Formed a year apart in the sixties, both have diversified significantly in the subsequent decades, looking to bring in additional sources of revenue and deliver innovative commercial ventures that generate social value.  

Operating across a broader spectrum of activity for such a long time means that there are lots of very skilled people in both organisations. Having such a wealth of experience and complementary set of skills is a real boon. It's fair to say that the speed with which we've been able to integrate with the group is not just down to how well the two organisations fit, but also thanks to the dedication of both teams involved. That willingness and enthusiasm is something we're keen to utilise as we look to enhance our services in the future.

In terms of that future, there is an eagerness on both sides to grow our long-standing student accommodation offering, which today comprises of around 20,000 bed spaces. We're keen to share our expertise and deliver the last remaining piece of the 'housing jigsaw' for Places for People. Student accommodation is something we've been involved in since 1997 and an area that's seen continued growth, despite the economic downturn. It's also a market populated by increasingly discerning consumers, bringing many different challenges but also significant opportunities.

For our core business it's a similar story. With Places for People's help we can add value to what is already a successful enterprise via greater economies of scale and by accessing well-established group functions and expertise that will help drive efficiencies.  It helps us to focus on delivering much needed new affordable housing at a local level and ensuring customer satisfaction remains high.

The whole local delivery approach is central to the Places for People placemaking approach, and something that we believe is absolutely essential. It's a path previously trodden by group members Castle Rock Edinvar and Cotman Housing Association - and with significant success.  In line with our predecessors, Derwent Living will keep its brand and local offices, something that ensures continuity and consistency of service for customers. This continuity of locally-delivered services was a key priority for residents when we visited them during a wide-ranging consultation back in the autumn.

Being able to satisfy that requirement was very important to the Board and leadership team at Derwent Living. It shows that there are merger models out there that can add value without having a detrimental impact on customer experience or sacrificing any of our core values.

It's just a matter of fit and focus. 

This blog was originally published on 24housing on 3 February 2017

03 February 2017