Part two of our Merger series introduces us to Bob Heapy, Chief Executive at Town & Country Housing (now part of the Peabody Group, and a subsidiary of the G15 housing provider), and offers an insight into some of the challenges, uncertainties and opportunities faced when merging two already well established, strongly performing and uniquely branded housing organisations, one with the historic accolade of the being the oldest and one of the biggest social housing providers in the UK.
Being part of such a well-known family of housing providers brings its own set of responsibilities, not least towards their service users, but also towards employees, other stakeholders, as well as the organisational brand. In part one, the importance of strong collaborative values and communication at all levels were cited as being key to steering organisational mergers through to successful completion. Below, Bob Heapy gives us an insight into some of the processes and reasons behind the decisions involved in the journey.
Finding The Right Partner
There are many different reasons why large, already established housing organisations make the decision to merge with one another, for instance performance evaluation, efficiency drivers, functionality and commercial pressure. What was the main driver behind the Town & Country Peabody merger?
“I’m pleased to say that none of the above were our driver to find a merger partner. We were and remain, high performing and efficient. Town & Country have a reputation for being innovative, problem solving and able to punch above our weight and often the ‘go to’ HA for many of our LA stakeholders. We could have effectively continued our business into the future, continued to deliver 300 homes each year and to continue delivering high quality, accessible services to our residents.”
So why the decision to merge?
“The context is important. The government has made it clear that it wants housing associations to ‘up our game’ in the provision of new housing. At T&C we have always taken this role very seriously and always sought to utilise our capacity to deliver as many new homes as we can. But we wanted to do more! Over the last few years our ambitions for development have been curtailed by Government policy, most notably the rent reduction. As always, we found a way and continued to develop new homes but due to the financial constraints our ability to develop will not reach the heights we want and that we have historically been able to deliver. So, if we continued as we were it was clear that we will be constrained in how many new homes we can deliver by our size.”
It’s plain there is ever-increasing pressure and demand for more social housing in Kent and East Sussex, and many other housing providers in the area have chosen to seek regional partners to increase their capacity. Why was this different for Town and Country?
“At first, we did look at this route, but experience has shown us that we were not an attractive merger partner to a similar sized, regional based business as we are very efficient and high performing when compared to our peers. We had already, rightly, used our balance sheet to maximise output of new homes and we hence carried a comparatively high but manageable debt per property. This meant for us, further efficiencies were difficult to achieve. We were also restricted on the amount of new debt it would be prudent for us as a business to take on, all which added to the constraints on the number of new homes we could deliver.”
So why Peabody?
“Peabody intend to remain based in and focused on London, but their Board see London’s housing challenge much, much wider than the Greater London area and they felt that a well-run, respected, subsidiary business based in and developing in Kent and East Sussex would support them in facing that challenge. We are attractive to someone like Peabody because we are efficient, deliver high quality services, have strong existing relationships in the region, have the ability to influence the regional agenda and we have a track history. Peabody approached us because we were effective and high performing, and we have joined Peabody as an ‘enduring subsidiary’. With their financial muscle behind us, we are increasing our output of new homes in our operational area from around 300 a year, which we can do on our own, to about 800 a year.”
Getting The Process Right
The merger completed after 18 months of hard work by both parties. How important is it to Town and Country, and to the residents in the Kent and East Sussex social housing community, for the organisation to retain its independence under the roof of such a large housing brand, and maintain its original aims?
“It’s really important to Town & Country to remain independent and to retain our own strong and respected brand and we will continue to operate in our heartland of Kent and East Sussex. We have and we will remain a strong, viable and high performing business. We are rising to the challenges of the sector and of our region by building more homes; delivering excellent services to our tenants; working in partnership with our stakeholders and using innovation to achieve joint aims.”
How did Town & Country and Peabody both ensure the two organisations were a ‘good fit’ to one another, and what was one of the biggest challenges faced?
“There is a genuine will to learn from each other. When two organisations of a similar culture with a willingness to learn and improve come together they can achieve an enormous amount when the groundwork is prepared properly. We felt there was enough synergy and a joint will to make something happen, so we set up a merger subgroup of Board and constructed an IBC which was approved by both boards in May 2018. We then had the torture of Due Diligence on both sides! We really got into and understood the nuts and bolts of each business and where any ‘bodies were buried’.
One of the main challenges was not to underestimate the resources required. To make it all happen we had Project Teams within both businesses, Directors leading on their specialist areas. A JET driving the process and a JPB of Chairs, non-executives and CEOs with delegations to make key decisions from both boards.”
What were the reactions of your staff to the merger, and how did you overcome some of the difficulties in communicating the changes to all of the variable employee groups involved?
“We really wanted to take staff with us on the merger journey it was only once we were public, we could really start to engage with staff. This was because of practical difficulties. As both businesses had bonds which could be traded on the markets we were covered by the ‘market abuse regulations’ to prevent insider trading. Those staff that were necessarily engaged in the project teams, particularly during due diligence, we put on an ‘insider list’. Once we were public, we had a communications plan that swung into action. Most staff would see little if any change to their jobs. Some staff particularly central services have seen some change in reporting lines and processes, but this has taken a bit of time as we align the businesses.
We also utilised our ‘leadership group’ to lead on the communications. We had already negotiated initial T&Cs, we are not a unionised workplace, so staff elected representatives that met with me, directors and HR to work through the T&Cs in a transparent way. I think we were able to demonstrate a good inclusive process given the constraints. We have only had one resignation citing the merger as a reason.”
Impact and Opportunities
What are some of the positive impacts and opportunities the merger has created for your staff?
“We already had and have retained a high performing committed staff group. We aim to be the local employer of choice offering good T&Cs of employment and we invest heavily in identification and the support of the talent we have. We have flexible working practices, part time, flexible hours, mobile and home working. We invest in staff through L&D for both professional and personal development. We have apprenticeship schemes investing in entry level jobs, graduate entry, a target of 30% of all roles filled from internal appointments and a will to grow our own stars of the future. However, being a small employer the ability to progress and the level of investment we can sustain is constrained and I must be honest and say the major reason cited at exit interviews was the inability to progress.
The opportunity Peabody being a ‘big corporate’ gives us a in L&D resources at all levels is huge. We are now better skilled at identification and support of talent in the business. We have access to corporate induction, formal professional training, personal learning and development, and the range is vast from entry level to an MBA partnership with Henley College, and of course the opportunity for progression within the group, project work and secondments is much improved.”
It goes without saying that large organisational mergers where both sides already have a well-established, successful brand, reputation and foothold are not going to come without their unique challenges. However, what we can learn from the Town and Country Peabody merger is that with a joint focus on strong synergetic values, a diligent approach to digging up the foundational groundworks, surfacing and airing any potential issues openly, and remaining sensitive to the expectations of service users, staff and stakeholders alike, there is solid prospect of successfully combining the strengths and opportunities to create exceptional benefits to not only the organisations involved in the process but to our regional and national housing delivery service as a whole.
With special thanks to Bob Heapy for his collaboration on this article. If you’d like to find out more about Town and Country, part of the Peabody Group, please visit their website.
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Alma Sheren is Head of Marketing and Communications for Greenacre Recruitment, and collaborates with the team and wider network on Leadership, Human Resources, Change Management issues and the challenges and transitions currently facing the UK housing sector.