Mergers and acquisitions: are you prepared for the new landscape?

Posted: 8th November 2015

steven_mcintoshYou’d be forgiven for walking into a discussion about mergers and acquisitions (M&A) if it conjured up images in your mind of large commercial organisations carrying out complicated deals being overseen by the city watchdog. The fact that M&A is increasingly talked about in the social housing sector is, in many respects, an indication of just how commercial the sector has become.

Over the last 10 years or so the constant reduction in social housing grant has led to a much greater reliance on borrowing somebody else’s money, with all the risk that entails. Now welfare reforms, rent cuts, ‘pay to stay’, and the extension of the right to buy to housing association tenants, is about to make working in a challenging environment, much more difficult for all, and maybe impossible for some.

And there may well be further changes which will impact on the sector in the not too distant future.
The new government has made it clear that it thinks that the social housing sector is inefficient and needs a shake-up. It also probably wants to see fewer organisations in the sector. The English housing regulator says that registered providers (RPs) ‘need to consider all options to drive value for money, including mergers if necessary’. We know the National Housing Federation is already working up a merger code of practice.

So the cards are on the table.

Mergers have been around in the sector for a long while, but the reasons for looking at options now have become much more focused around costs and generating efficiencies.

At Altair we are being increasingly asked to appraise M&A options for social housing providers of all shapes and sizes.

But what can an RP looking to merge or acquire ‘offer’ a potential partner? Are the correct policies and procedures in place and up to date? Have internal audit issues been dealt with? Are management and maintenance costs per home too high? Is there a realistic business plan? Is there a strong skills orientated board and executive team with a clear strategic vision for the future? Is the best possible service being provided for your tenants?

And if an RP is looking for a partner, shared culture and values are often mentioned, and this is undoubtedly important, but what does it really want to achieve, apart from survival? More development, new geographic areas to work in, introduction of new services, a change in culture and emphasis, and can any of this be done without jeopardising the existing operation, as well as holding onto essential staff and board members?

And RPs, particularly those who are viewed as small and medium, or with limited capacity, may have to answer many of these same questions at the very least, if they wish to increase their chances of staving off an unwelcome approach from another provider to give up the game.

Of course not all RPs will want to or even have to consider an M&A strategy. An increasing number will though.
Whilst the future appears uncertain it’s probably a safe bet to say that it will be a future that contains fewer social housing providers.

In the face of the changing economic and political environment, for those RPs that wish to continue to help tackle the desperate housing need and provide a positive contribution to the lives of their tenants, there is much to consider and plenty to do.

For more information about the ways in which Altair is helping organisations to deal with issues around acquisitions and mergers, please contact Steven McIntosh on 07584 421 364 |

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