How a strategic merger could save smaller housing associations

With capital budgets for building new social homes cut by almost 60% and housing associations being urged to increase new social rents from the existing 50% market rate maximum to a new limit of 80%, it's a worrying time for smaller housing associations. The problem lies with location. The affordable rent scheme, due to launch in April, means that differences in market rent values and existing social rents could show bigger gains for some housing associations and only smaller increases for others. London associations, for example, may see benefits under the new scheme due to the capital's high market rent value. Companies in the north of England, on the other hand, may see gains of as little as £11 a week. Could it be that safety in numbers is the answer? Angus Groom, the executive director of corporate and business at WM Housing has been through the process. His previous employer – West Mercia Housing – was a 6,000-home strong federal company of three autonomous housing associations. West Mercia integrated with a larger Coventry-based HA called Whitefriars in December 2008. The end product was a merged and re-branded association called WM Housing , which increased the companies' combined owned homes to 23,000 and projected significant gains for the companies' five-year financial outlook. For Groom, "the attraction of Whitefriars was a size and scale that would drive efficiency and by making savings would build a better service". Even beyond the financial possibilities, a merger provides housing associations with unique skills and resources that were perhaps not readily available before. Whitefriars, for example, is an expert in the field of ASB (antisocial behaviour) and is recognised for its ability to respond to any ASB with specialist mediation and prevention skills. Their in-house "asb4" team has benefited WM Housing more than first expected. "That experience in ASB has largely bought two things to the table," explains Groom. "Mediation skills from respected trained mediators and specialist advice for the group as a whole. They have and are sharing all of their expertise with WM and are training them up in areas such as drug counselling and family intervention." For smaller, more specialist social housing firms a merge like this could mean more than just some financial stability. When planning an integration, a housing association should look beyond the acquisition of new homes, and perhaps find a partner that can offer new specialist skills such as dealing with the elderly, working with young families or expertise in certain types of building. However, it's not always the right solution. Any potential partner-company's reputation and reliability should be seriously considered. Groom says, "The key thing to bear in mind is financial viability – you have got to be very careful about the business you are going into and look long and hard at the other company to see if they really can deliver. Look past the gloss of the website fronts and know that this is a relationship that you want to be in." Looking past the gloss also means looking at yourself because, like any business or enterprise, merging means being frank and upfront with your fellow association. Finding skeletons in the closet some years down the line makes for a bad business relationship and – even worse – can really jeopardise the service you are giving your customers. "Communication is crucial," agrees Groom. "Creating a joint integration committee turned out to be an incredible benefit – the committee was made up of members from each association and oversaw the entire merger process. They were able to streamline the route we were taking by removing a lot of the pressures and paperwork from both boards." An integration or merger committee was something Groom really emphasised as helping both companies. But he was also keen to stress that as a two-way street, all parties need to set a strict timetable and meet intended deadlines. The meeting milestones for the West Mercia and Whitefriars merger ensured that the committee met roughly once a month. They addressed areas such as the heads of agreement and any legal issues, funding, staffing, governance, customer consultation and so on. Although the merger process might seem extremely smooth at first glance, Groom is quick to note that an integration like the one he oversaw can also throw up a few problems: "There are certainly some ongoing issues that can take real time and effort to be cleaned up. One is IT. Essentially we have got two different set-ups consisting of their own server systems and their own ways of handling and dealing with everything electronically." Other systems (the way you manage your employees, for example) can also conflict, and installing a new way of doing things could take several years to iron out. However, the joint integration committee should smooth out this process and help out with any of the teething problems that come with mixing two or three operation models. Of course, these new business models can help bring a better efficiency and shed new light on how to go about getting things done. You may find, say, that your fellow HA's IT set-up is actually faster, more accessible and more informative than your own. Groom's final piece of advice relates back to finding the right partner for you. "There is no geographical overlap between the companies in our merge. Not only does this mean we can spread our web of influence and work in a wider area, but it also means we can provide a commitment to our staff that everybody will be keeping their jobs." In times of a company restructure, keeping the workforce on-side and guaranteeing their jobs can only help the integration process run more smoothly. For any smaller social housing firm out there that really might be affected by the cuts, a merger with another social housing group could really help. Aside from the obvious financial benefits, you might also discover better ways of running your association, managing your team, setting up your business systems and learn some invaluable new skills and specialisms along the way. The truth is that mergers could really save some of the smaller HAs by helping them to double their influence or to work alongside a housing association with more weight and width. Groom agrees: "Given the current changes in the housing sector, the impact of the CSR and the changes to housing benefits, there is so much more diversity and support in a larger group. Those smaller organisations could really benefit from that infrastructure." This content is brought to you by Guardian Professional. For more like this join the housing network