Recent weeks have seen the collapse of a number of proposed “mega-mergers” in social housing. The most high profile of which have been the proposed mergers between Sanctuary and Housing & Care 21 (to form a 120,000 homes landlord); Hyde Group, East Thames and L&Q (to create a 135,000 homes group); and Genesis and Thames Valley Housing (to bring together assets of 47,000 homes).
These mergers had progressed to various stages before being called off, with Genesis and Thames Valley Housing reportedly having obtained lenders’ consent, and being “on the verge of completion”. Despite Hyde Group withdrawing the merger between L&Q and East Thames is still going ahead.
Whilst there are some clear rationales for merger (including to create economies of scale and become ‘a bigger landlord’ for the purpose of increasing development capacity), mergers between housing associations face a number of challenges, some of which are peculiar to the social housing sector.
“Crucial to a successful merger is to identify the right “fit”. One of the most commonly cited reasons for failed mergers (and a challenge even for “successful” mergers) are the things that are not easily identified in due diligence. Differences in culture, style and approach between two organisations can be as difficult (or more difficult) to overcome as an incompatible financing, IT systems or governance structure.”
Despite the government’s ambitions to increase housing supply, individual housing associations have their own complex structures and also their own social purpose to the communities they serve.
The importance of preparatory work and thorough investigations cannot be underestimated with regards to all aspects of the organisations proposed to be merged, including: financial matters, governance structures, pensions, IT systems, staffing and the relationship and accountability to residents.
Perhaps just the government drive is not enough. Having a common sense of business and shared values also play a crucial role.
For more information about the pros and cons of mergers, please contact Simon Smith in our commercial team and Kary Withers, head of Social Housing and head of our housing management team. For advice on the implications mergers have on staff, please contact Marc Long, in our employment team.