Organisational Mergers Part 3 – Effective Process, Value Creation, Positioning and Branding

Despite (and especially during) the current unprecedented uncertainties affecting most of our organisational operations at present, there is still a need for effective strategic governance, process, structural transformation and continued effective service provision, not least in order to maintain a level of assurance, balance, security and trust. Those organisations currently in the middle of or at the start of their merger journey may have been blindsided by the sudden Covid19 outbreak, the emergency measures put into place by government bodies, and the ripple effects that are appearing and widening across the sector, and setting some time aside to accrue some valuable insights from those who have managed and led some of the most successful mergers in recent years could be of crucial benefit.

Unprecedented and Pivotal Change

Although nobody can predict where the world, or indeed the UK housing sector, will be when we are out the other side of this unprecedented pandemic, there are some givens, all of which have parallels with the areas we will be discussing in Part 3 of our merger series. Leadership, human spirit and resilience will define this moment in history, and many sectors will be looking to learn from the crisis and emerge with a new ‘business as usual’ model that may well inevitably be leaner, more digital and efficient.

I’ve been speaking to Amanda Leonard, Chief Executive Officer at PerfectStorm, a Management Consultancy specialising in transformation, mergers, organisational management, complex change management, PR and marketing. Amanda has an extensive track record working on mergers in the both the private and housing sectors, and has led on several high-profile mergers during her 25-year career with FTSE 100 and private equity organisations, as well as leading on housing sector mergers and integration, including Clarion Housing Group, the country’s largest housing organisation, and Karbon Homes. Amanda also operates as HouseMarks commercial advisor and runs a boutique communications agency.

I asked Amanda for some insights into her experiences of leading successful mergers, both in and out of sector, on key topics including organisational transformation, culture and behaviour, the importance of considering diversity, inclusion and belonging embedment, communication and structural change:

What would you say are the five key factors to consider when implementing a successful organisational merger, especially during a time of uncertainty?

“There is plenty of theory about mergers, and of course there are several building blocks that are essential to deliver a successful merger at any time, but especially in times of unprecedented change, it’s getting underneath the process steps to really visualise the new organisation and motivate the raft of people who need to believe in the success of the new organisation that leads to success. I’m often told mergers in the housing sector are different, because there is no multiple applied and no sale price in the typical sense. But think about it, it’s even more critical where there isn’t a deal price, to get things right, there is no single driver that everyone is after, therefore the compelling logic and belief is even more key. If I had to pick 5 things, based on my private sector and housing sector experience they would be as follows: –

1) Be really clear about why you are doing it, have a narrative that conveys this and make sure everyone keeps this front and centre. Having a compelling reason helps defuse the inevitable personal views when you hit a roadblock, (which almost all mergers do at some point). It also helps to remind you why you are in it when you become consumed with business cases that funders and Boards need to approve, consultation programmes that get residents on side and media and sector opinion that often has a view on you and your deal. You should also stay true to the narrative that gets everyone behind the deal.

2) Vest the key people really early, way before any formal structures. Formal structures, even designate ones still come pretty late in the process, by which point, power bases will have been established, preconceptions shaped or shattered, and the market, Boards and influencers will have taken a view on the union. Vesting people early through joint working groups, joint Boards and small power triangles who work informally together on various aspects of the deal, shape collective thinking, start a new world narrative and break down barriers in really powerful.

3) Have collective mechanisms to accelerate delivery. Mutual interest and accountability for solving problems and achieving merger milestones will not only ensure that legacy organisations don’t entrench, but they also provide a formalised frame for joint problem solving and ensure that any headaches identified through due diligence are acknowledged and resolved one way or another. Of course, it’s key that the individual governance structures of the organisations make the constitutional decisions, but it absolutely helps to have collective visibility and motivation to move things along.

4) Be uncompromising about value creation. I use a model for this, that looks at size of prize versus implementation distraction and cost of change versus benefit realised. It’s not enough to say – I will deliver x of efficiencies or streamline y or build z more homes, you have to look at what optimal benefit realisation looks like. This should always be within the frame of your risk appetite, your responsibilities and capacity, but an organisation that fails to unlock optimum capacity and value is almost as guilty as one that stretches itself. Using this simple frame helps you to think about trade-offs, timescales and where an obvious prize may make you too vulnerable because of implementation risk. Equally some benefits are so significant you may choose to invest more in cost of change to increase capacity. Everything is a choice, and I absolutely don’t buy that internal capacity limits what can be achieved. You also need to ensure that you can measure the success of the new organisation quickly in an integrated way. The work I do with Housemark, is helping organisations to get this integration baseline visibility really quickly, so that you can demonstrate value and performance to residents, regulators, Boards and staff.

5) Don’t be immobilised by integration. Integration is a process; it is not transformation and benefit realisation. If you treat integration as a series of tasks, then all you will end up with is a cheaper sum of the two or more parts. Start integration from the lens of optimal organisation. Take yourself back to why you are merging and of course be realistic about immediate needs to deliver efficiencies and unlock capacity, but don’t compromise where you don’t need to. Don’t assume that a little from organisation ‘a’ and a little from organisation ‘b’ will get you the best and even more common, don’t assume that because one organisation is better than the other in a given area that their route is the answer. Look at what you are trying to achieve and then look outwardly both within and outside of the sector for what good looks like. Organisations can be very inward focused post-merger if they are not careful.”

As traditional practices and processes are found to be disadvantageous to the newly merging organisational structure, there are bound to be emotional attachments to past behaviour and methods. How can those leading best tackle these challenges in a sensitive way and encourage individuals to embrace and take up fresh opportunities to drive forward better practice? 

“Definitely leave preconceptions at the door. Just because something worked in an old legacy structure it doesn’t mean it works in a new world. Equally, don’t throw the baby out with the bath water, it may be that some things work really well and are easily scalable. This could be low hanging fruit. In my experience in Compass Group PLC, the world’s largest foodservice and hospitality business, we acquired businesses that had been founded by the incoming CEO or Chair, who had to go from creating and owning the business to being a corporate Director and one of many so the sensitivities and personal emotion that we had to deal with were off the chart. There are several things you need to do to navigate these sensitivities – remember how the individual may be feeling, don’t assume because something isn’t great that they aren’t great. It could be years of a terrible process or politics that has led to an outdated practice. If you engage legacy teams in designing the new world, they are much more likely to be open to change. You should also create a new language, a new tone and talk about legacy rather than old organisation badges and names, this helps to move people through the change curve, accepting that legacy was a great part of who we were but it’s not who we are now, it’s our heritage. Finally, I recommend that you create a new cohort, which invariably will contain combined teams, using your new challenges, new language and new identify to get people behind the brave new world.”

How does language and behaviour affect implemental change throughout assimilation, process, culture and an inclusive workforce? 

“Language and behaviour is the biggest signal that people will take to decide if leadership are on board with a new organisation. This can be tough, and it’s particularly tough if mergers have a party that is seen as dominant or its styles and cultures are different. Leaders have a responsibility to create, act and talk in a way that is reflective of a new identity. New brands and names help, but the tone of voice, the culture and leadership behaviour is the defining feature. If a legacy leader talks critically of one part of the organisation, others will follow suit and quickly create a divided narrative and culture. There is nothing wrong with acknowledging a problem, even if it sits in one part of a legacy organisation, but what is key is having a shared narrative and speaking with one voice about that problem. I have seen simple steps in the mergers I have worked on in housing, such as the CEO from one organisation, having a PA from another and a leader from one, having a deputy from another.”

How important is adaptability and being open to new ideas from outside influences, such as the private sector, when integrating social housing organisational mergers?

“I think this is critical. The housing sector has got much better at being outward facing, but we still have a way to go. The sector is being disrupted, both internally and externally with new entrants. This will be a game changer, as models, returns and aspiration changes the landscape. I constantly draw on my private sector experience when working on mergers in the housing sector. A merger is a merger, whatever the sector. There are regulators, customers, advisors, funders, employees and politicians. We should look to other sectors to learn how to scale successfully and understand the pitfalls. I worked in an M and A team in the late 90’s early 00’s when growth was seen as the only way and bigger was always seen as better. Disposing of Little Chef and Travelodge, to private equity taught me to understand the power of the customer, the British obsession with sentiment and nostalgia and the power of the media. This has helped me to put myself in the shoes of the customer when leading on mergers in the housing sector and creating consultation that is meaningful and engaging rather than a hoop that one has to jump through.”

How big a part has transparency played when communicating the vision, implementing ideas and processes and building relationships between management, staff and service users?

“Being open about what you can and can’t share is vital in a successful merger. Wholesale transparency just isn’t possible. I spent my career with Sainsbury’s, Granada PLC, Compass Group and SSP who run some of the food and retail you see in airports and rail stations, including M&S Simply Food, Starbucks, Caviar House and Prunier. Being part of listed businesses, growth is share price sensitive, and of course in the housing sector much of the debt is listed, and therefore as frustrating as it is, an RNS (stock exchange announcement) has to be first to confirm things. But that doesn’t mean you can’t be transparent. Be honest, and tell teams that you are open to growth, that you are in discussion with likeminded organisations, and make sure that your internal narrative is consistent. Some mergers are formed in dark corridors, and this can actually be perpetuated by egos, advisors and agendas. What I’m saying is make sure people understand that growth is sensitive and understand why you won’t be able to share certain things. When you do have something concrete to say, there is nothing to stop you hitting a cascade at 7.01am after your RNS and holding a briefing first thing, following the announcement. I also think you have a duty to be transparent about the heat and the narrative and most importantly timescales to manage expectations. Press speculation is rife around merger talks, both good and bad, helpful and unhelpful. It’s really key to contextualise the ‘word on the street’ with facts and updates. All of this helps to build a healthy culture within the sensitivities and constraints of secret growth talks.”

There is a big drive right now on creating a sense of belonging in the workplace. How does a newly merged organisation encourage the combined workforce to follow their individual passions within their roles, and how has this affected their progress and sense of belonging within the organisation?

“I think this starts with a really exciting recruitment process. One that brings the vision of the new organisation alive and recruits to the standard, behaviours and vibe that the new organisation wants to create. When I led on the Clarion merger, we had a fantastic selection process, where we made it clear that no one was applying for a bigger version of their own job. It was a new job in a new organisation. We also created different job roles in some cases and changed portfolios and reporting roles to bring fresh thinking, new challenges and stretch talented people. Using secondments and project roles during the process also helps to shine a light on talent and passion. Creating new strategies from the high-level plan is also a big opportunity for collective engagement and buy in and ensuring that leadership forums and cross functional communication is at the heart of the engagement strategy. I would even suggest that a modernisation of ways of working, policies and office environment also signal change, and a feel of belonging to something new.”

There are many different components to navigating and seeing an effective and successful merger through to completion, but it is clear that at the very heart there must be clear vision and reasoning, which should be at the forefront and epicentre of every decision and driver for change, and communicated clearly to not only the key change makers, but also those affected throughout the integrating organisations. Getting everyone on board with the restructuring and rebranding can be a complex process, however if communicated and executed sensitively and clearly, whilst considering how previous structures and behaviours were managed and cultivated (whether effectively or ineffectively) can help to shape and develop new ways of operating in the most successful, least threatening and most inclusive ways. As always, embedding effective D&I culture, language and behaviour is essential to the growth of any organisation, not least a newly integrated and freshly branded establishment, and must remain at the heart of effective, long lasting and positive change.

With special thanks to Amanda Leonard for her collaboration on this article.

For more insights into Leadership, Performance and Change Management, Diversity & Inclusion and other current housing industry topics join us on our Insights page or follow us across social media to see the latest news and updates.

Alma Sheren is Marketing and Communications Lead at 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.

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