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A merger doesn't have to be a choice between big and small

David Cowans

By David Cowans, Chief Executive of Places for People

Housing Association boards are going through a time of considerable change and challenge. While there are enormous opportunities to demonstrate new approaches to increasing house building and promote choice in the housing market, there are significant challenges at the same time.

Not only are they dealing with the impact of the -1% rent settlement for 4 years to 2020/21, they are also working through the economic and policy challenges that their housing organisations face and how these challenges could affect their ability to make a difference in the future.

How to square the circle of dealing with the challenges while at the same time expanding our offer to society is the key strategic focus. In this context it is unsurprising that mergers are high on the agenda for many boards.  The motivations to merge are varied but it often comes down to scale, both to achieve efficiencies and to boost the capability of organisations. 

Joining forces with another organisation can and often does unlock funding opportunities, create back office efficiencies and generate economies of scale in procurement and operations as individual companies tap into the buying power and borrowing capacity of a larger group. For those who can successfully create the right motivation and negotiate their way through the process of coming together, these alliances can have the potential to be transformative. Equally, they can be unsuccessful.

For smaller organisations trying to survive and compete in an increasingly difficult operating environment, there are clearly advantages of becoming part of a larger group. However, often these opportunities are portrayed as a binary choice between the big and small, the national or the regional, becoming part of a corporate centre or retaining local control. But why does it have to be a choice? Is it possible to gain the benefits of becoming larger without losing your local identity?

There is a powerful argument to say that merger doesn't have to be a choice between the big and the small; it needn't be a zero sum game, there is a middle way. This middle way is about creating mechanisms which allow organisations to merge with one another whilst retaining what makes them effective in their communities. Organisations of scale will certainly have the capacity to build greater volumes of new homes, can access capital more efficiently and generate savings through centralised services and greater buying power. They can take on larger scale projects in regeneration, estate renewal and development. However, effective delivery of management in any size of business requires local knowledge, insight at the neighbourhood level and a detailed understanding of the customers you serve. Any smart merger relationship is built on preserving the qualities of merging organisations and ensuring that local identity and expertise is protected.

At Places for People, we have experience in creating successful relationships through mergers that have brought huge benefits to both parties. Castle Rock Edinvar and Cotman Housing Association joined the Places for People Group in 2005 and 2009 respectively. They have retained their board, their brand, their business plan and their commitment to the communities in the geography where they operate. They can now access the Group's treasury facilities and make use of Group back office infrastructure and central expertise where it improves their business delivery. Their customers have benefitted from Group products like low-cost loans through our Financial Services company or discounted access to Places for People Leisure facilities. They have both strengthened the Group and its presence in a new geography, bringing their local expertise and taking over the management of Places for People stock in the area creating efficiencies for the Group. 

I am convinced that where Boards have the vision to imagine a partnership between two organisations where values are shared and the customer comes first, size doesn't matter. Mergers take effort, vision and attention to detail but the benefits of partnership to both sides make a compelling case for action.

This blog was first published in Social Housing on 30 November 2016.

01 December 2016