The Merger debate

Sheron Carter Gateway Housing, Merger debateIt is interesting to look at our sector’s approach to the thorny issue of mergers compared to charity and civil society organisations.

For the charity sector, a company called Eastside Primetimers in partnership with Prospectus published The Good Merger Guide. It’s a really useful publication which gives great tips on questions to consider before embarking on a merger. And it sets out the steps to manage the process.

According to this guide, there appears to be a much higher rate of activity in the charity and civil society sector. Over 260 mergers were recorded on the Charity Commission’s register between 2006 and 2009 alone. A survey of the largest 100 charities, carried out by Eastside in 2011 reported that 91% of respondents had discussed some form of merger at Board level.  Drivers for merger in the charity and civil society sector will of course be different to ours. But it did make me wonder whether the softer approach of a ‘guide’ would be more readily embraced.

The Mergers, Group Structures and Partnerships Code has received a mixed response. It notes many things that Gateway would do anyway. But the ‘comply or explain’ tone is a tad irritating and has put my board off. The trickiest bit of a merger is assessing whether the cultures can line up. People’s judgements about that are often the reasons mergers fail, even if the stated reason is something else. A code that encourages one party to start out by demanding the other must do something sets a tone that makes failure even more likely

Last year Gateway worked with Altair to draw up our merger strategy. It was a useful process to help us to think through what we would protect at all costs. We would expect a merger to:

  • Enhance service quality
  • Retain our community focus as this is what our stakeholders and beneficiaries value.
  • Result in a fully merged entity as we believe this better serves residents with a common vision and purpose
  • Retain and improve our strong financial position.
  • Have a skills based board
  • Share the same ethos and culture

Over our 90 year history we have merged with many local organisations which make up Gateway today. It is not new to us and we welcome it. But it must be on the terms our Board determines and supported by our shareholders. So we have decided to embrace the broad principles of the Merger Code without fully adopting it. We will incorporate it into our merger strategy and continue to take a pro-active approach. We much prefer being on the front foot looking out for partners that are a good fit with us, rather than waiting for a ‘predator’ to come knocking on the door.

Sheron was appointed Chief Executive at Gateway in May 2011 having held several positions with London based housing associations. Gateway predominantly operate in the London Borough of Tower Hamlets but also has a small stock holding in Hackney and Newham.