Alpha Housing - example of a VCSE merger

Alpha Housing - example of a VCSE merger

For a merger to succeed in the VCSE sector, finding a partner with a similar ethos and having a strong board leading and supporting the process are enormous assets. This case study presents the successful merger of two housing associations.

Reasons for merger

Abode Housing Association was a relatively small housing association and had been looking for a partner organisation to consider collaborative working.  The Chief Executive of Abode, May Green, identified Presbyterian Housing Associations (PHA) as a potential organisation to work with and informally approached PHA to assess its willingness to consider formal collaborative working, potentially a merger.  An informal meeting took place between May Green and the then Chief Executive of PHA, John Tinman.  Once it was established that PHA was interested in working with Abode, the management committees of both organisations discussed what options should be considered.  These individuals recognised that the two organisations had a similar ethos and worked with the same service users and from this decided that merger was a viable option.

“Due to the similarities of the organisations the decision to merge almost came together as a natural process. It started off very informally and gradually got more and more formalised.”
Billy Graham, Chief Executive,
Alpha Housing Association

Process

Once the decision was made to merge, the two boards set up a sub group called the merger committee.  Some members of this group had managed mergers in their private business lives.  It was during this period that PHA recruited its new Chief Executive, Billy Graham, following the retirement of John Tinman on health grounds.  The new chief executive of PHA took the lead in the merger partly because the chief executive of Abode wanted to take early retirement and, therefore, Billy Graham was to be the chief executive of the new housing association.

The merger process took nearly three years from initial discussion to the establishment of Alpha Housing.  The chief executive of PHA invested much time in the merger process working closely with the merger committee.  The boards of both organisations were very active and meetings took place at regular intervals.  Detailed due diligence was undertaken by management and staff in both organisations covering the condition of the stock, financial issues, staffing, policies and procedures.  Towards the end of the process external auditors were brought in to ensure that nothing had been missed.

“Each party went into the merger knowing all the strengths and the weaknesses of both organisations.”
Billy Graham, Chief Executive,
Alpha Housing
Association

Prior to the establishment of Alpha Housing, the two management committees established a shadow board.  In April 2009 the shadow board was formalised and the management committee of the two organisations started running in shadow mode, clearing policies and getting ready for the launch of the new organisation.  In total there are fifteen members on the new board of Alpha Housing.  These members are drawn from both organisations.  Two of the committee members from Abode were considering standing down and took the opportunity to go at the point of the merger.  This left a balance of 15 individuals from both organisations which make up the full complement to the new board.  The two boards were happy with the process of establishing the new board and worked very closely together to ensure that the transfer from each organisation to Alpha went smoothly.

“From the point of establishing the new organisation we no longer talked about the two organisations, unless we had to draw a distinction; we see it as just Alpha.”
Billy Graham, Chief Executive,
Alpha Housing
Association

Billy Graham, Chief Executive, Alpha Housing Association (far left) with former Minister for Social Development, Margaret Ritche, MLA (centre)

During the merger process both Chief Executives of Abode and PHA met with and informed stakeholders and funders of the merger process and the intended outcome.  The Chief Executive of PHA (now Alpha) was in continuous contact with the Department for Social Development (DSD) with regard to the legalities of setting up and registering a new housing association and winding down two others.

“The Department were actually very helpful; they had a couple of meetings with me to go through the whole process.”
Billy Graham, Chief Executive,
Alpha Housing
Association

Initially Alpha Housing was due to come into effect on 1 April 2009; however, it was not set up until 1 July 2009.   The consequence of this was that PHA had to seek permission from the Industrial and Provident Society to extend its financial year until the end of June. 

The meetings of the two boards and the merger committee continued until the organisations were at the stage where they could apply for registration of Alpha Housing through DSD and the Industrial and Provident Society.  Once registered and established the new organisation put a lot of effort into rebranding itself.  With regard to the name, a lot of care was taken to ensure that it didn’t represent a takeover by one organisation. Alpha Housing is a combination of both names.

“As well as representing both organisations, Alpha also means 'first', and we want to be recognised as the first in the area of housing for older people. The name has worked out well.”
Billy Graham, Chief Executive,
Alpha Housing
Association

Challenges

As a consequence of having a long lead in time (over three years) and very active board involvement, the merger between Abode and Presbyterian Housing Associations went relatively smoothly.

“I can’t put my finger on anything that didn’t go well, maybe that’s because we took so much time over it. It was all so very carefully done and I give all the credit to the board for that, they didn’t leave any stone unturned.”
Billy Graham, Chief Executive,
Alpha Housing
Association

One issue that will take time to resolve is that of the different terms and conditions of the staff from the two former associations.

“These issues were identified during the due diligence process so there were no surprises. They will not be resolved overnight. For example staff transferred under TUPE legislation are on different pay scales, work different hours; some staff have a private health scheme and some have different pension arrangements.”
Billy Graham, Chief Executive, Alpha Housing

Since the merger, efforts have been made to bring all the stock up to the same standard and to have a forward programme where all schemes receive attention at standardised intervals.

What went well?

The boards of Abode and PHA worked very well together.  All processes and activities in relation to the merger were distributed equally amongst the two boards.

 “From day one the Board has operated as a single entity. They made every effort to ensure that we had a true merger and not a take-over. The chairman of PHA was unanimously voted as chair of the new board with no dispute. We didn’t rush into anything, which gave us time to get records, policies and procedures together and start fresh from the 1 July 2009.”
Billy Graham, Chief Executive,
Alpha Housing
Association

Advice

Billy Graham of Alpha said that for a merger to work it is important that the organisations share similar ethos.  A recent review of the process by the board confirmed that the merger had been right for both organisations.  The decision to merge had been taken for the right reasons and at the right time.  Careful preparation meant that no surprises had emerged during or after the process.  The board agreed that strong leadership by a board with previous merger experience had been crucial to the success of the project.

“Choose your partner carefully, share a similar ethos, and have a strong board leading and supporting, bringing in all their experience and expertise. I found that invaluable.”
Billy Graham, Chief Executive,
Alpha Housing
Association

 

Every effort is made to ensure that the contents of this document are accurate, but the advice given should not be relied on as a definitive legal statement.

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