A merger project has many different “components” and we can help you understand how they can be configured to deliver it successfully and efficiently. These include the key issues that will influence how the merged Group “looks”, and the project milestones.
We are closely involved in the preparation of the National Housing Federation’s “Voluntary Code for Partnerships, Acquisitions and Mergers” (the Merger Code, for short), which will set out a recommended route map for housing associations to follow when they are contemplating mergers. Our advice to you on this project will ensure you are compliant with this best practice throughout the process.
Our approach combines technical expertise with grounded, practical experience. For these types of “bet the farm” projects, our clients say our commitment to understanding their objectives, the outcomes we deliver, and the support we provide them with throughout the process, is invaluable.
We wish you the very best of luck with your merger project, and if you would like to talk to us about how we can support you throughout it, please don’t hesitate to contact me.
Our approach to housing association mergers
We know that no merger or group structure is identical, and that what the process is, and how the merged organisation “looks” depends very much on the individual circumstances of each organisation and its aspirations. Your advisers need to have a wide knowledge-base as well as experience of managing (and solving) complex issues thoughtfully and effectively.
We have worked on many projects where we have acted as project manager, but as many where we have worked closely with a lead consultant / project manager, and with internal project leads and treasury consultants. Beyond delivery of the legal aspects of the project, we can support you as closely as you need on the wider project management and co-ordination.
We’ve summarised below some of the projects we’ve been involved with, which give you a strong flavour as to:
- How we want to ensure that the legal due diligence demonstrates real value to you, focusing on the key risks so that it can be used as a tool rather than being a generic ‘tick-box’ exercise;
- Our good relationships with the Regulator, which has been immensely helpful in overcoming hurdles which can arise on these types of transactions; and
- Our awareness of the key issues and stumbling blocks in a merger situation, which enables us to spot issues at an early stage and ensure these are built into the planning of your project.How we work in a creative, solutions-focused way to deliver the best possible outcome for our client (and value for money); and
- How we focus on the key objectives and priorities (the “stop-go” issues), to ensure that those are always forthright in the delivery of the project (whether the wider group structure or as part of a due diligence exercise).
The merger process
No two mergers follow exactly the same path. The process will depend on many influential factors such as the need for third party consents (local authorities, funders, Regulator and relevant contractors), associated funding and corporate restructures, and governance timetables (particularly boards). However, most mergers will have a series of key milestones in common, around which the project “hangs”.
We’ve set out below a flowchart highlighting an indicative legal process for merger. Depending on the nuances of each organisation and the structure chosen, there may be additional stages, or there may be stages which need to be prioritised (perhaps because funders are envisaged to be a particular stumbling block).
On the far right we have also considered some of the key issues that are likely to be relevant to your proposed merger/group structure, which we will unpack with you at an early stage to make sure that the process runs as smoothly as possible, and to free you up to concentrate on the strategic implementation of the new structure.
If you want to work with us on your project, we will devise a more bespoke flowchart specific to your merger, and build this into a project plan and scope setting out exactly what needs to be done, and when, and by whom. This will enable us (either with or without lead project consultants, depending on whether you intend to use them) to manage the project efficiently, to give it the strongest chance of success.
You can find a detailed outline in the PDF here.
Due diligence during a housing merger
The primary purpose of the due diligence exercise will be for each board to obtain sufficient information about its merger partner to be confident that merging is a sound business decision aligned with its objectives. However, as well as an audit of each merger partner’s legal, operational and financial affairs, a good due diligence exercise will:
- Reflect the steps necessary for a practical and effective merger of the groups alongside the completion of the legal governance work and after the new group has gone live; and
- Produce, at the end of it, information that will be useful to the group operationally, by informing its assets and liabilities, and risk, registers, its “contracts estate” and its ability to comply with the Regulatory Framework.
Due diligence is, therefore, so much more than the “box-ticking” exercise of past times. Good management of a due diligence exercise is crucial to the success of any proposed merger both in identifying and managing emerging risks but also in building a good working relationship between the parties. This is especially the case when it is the merger of two housing associations (and their groups) with no acquisition price being paid and therefore no warranties or indemnities to be relied upon. Recent events in the social housing sector have underlined how important due diligence exercises can be but it is also important to ensure they are relevant for the job in hand.
The key characteristics of a really successful due diligence exercise are:
- A pertinent and well-considered scope that takes account of the specific nature of the businesses carried out by the due diligence subject, and is broad enough to uncover risks that might be overlooked if the scope if too narrow. We would prepare a bespoke legal due diligence questionnaire or information request based on our past social housing and wider transactional experience, tailored to the nature of your merger partner your approach to risk.
- A sensible agreement as to what “materiality” thresholds are appropriate. It is important to balance the time, expense and resource commitment necessary for due diligence against the size of issue that would have a material impact on the business plan of the enlarged, merged group.
- An engaged and experienced due diligence team operating under clear leadership and with good reporting structures, involving personnel from your organisation, financial advisers and accountants, as well as ourselves. Only your own internal teams will be able to make effective judgements as to the commercial/operational/synergy importance and potential risk brought to light by the information uncovered.
- A reporting structure for the findings of the due diligence investigations which not only highlights issues and problems detected but provides clear and helpful advice as to how these can be resolved either before the merger takes place, or once the new group is operational, and as much support as you need to sort these out at the appropriate time.
- Good and timely communication of the findings of the due diligence investigations that enables the merger partners to work together (and with us) to “solve” them, so they do not pose unacceptable risks to the merger itself or the group.
Our approach to due diligence takes account of all of these key characteristics and builds them in to our processes to deliver the best outcome. We also seek to deliver added value to the process through our “business assurance” options, which enables us not only to fulfil the primary purpose of due diligence (i.e. to highlight any barriers to or risks associated with the merger), but also to provide you with a service which enables the Group (post-merger) to ensure its compliance with regulatory requirements and to operate more effectively. In addition to the core due diligence exercise, and drawing upon the information we are provided with as part of our investigations, we can provide:
- Legal compliance certification, to enable you to confirm to the Regulator that the Group complies with “all relevant law”, as required by the Governance & Viability Standard from 1 April 2016.
- Funding reports designed to highlight where consent, notification and/or information is required to key operational and strategic matters.
- Asset and liabilities register verification to confirm you have the necessary information in a form acceptable to the Regulator.
All of these value added services link to the core due diligence service and we would be happy to discuss how we could provide these as part of the merger proposals, if this would be helpful.
For further information
Anthony Collins Solicitors was critical to the set-up of the new group structure for Torus, through the provision of strategic and specialist advice, practical guidance and support. The team were pro-active, working to tight deadlines at times to ensure that we could proceed as planned, and took the lead on key aspects of the project. They have been dedicated to building a close relationship with us and have actively showed an interest in helping us to achieve our objectives.Howard Roberts, Group Director of Finance and Investment, Torus.
Anthony Collins Solicitors was critical to the successful completion of the strategic development of the First Ark Group. The provision of specialist advice, practical guidance and support through what was a complex project involving all our boards, the Homes and Communities Agency, executive team and many staff was a key factor in realising the objectives behind the establishment of the group structure. Anthony Collins Solicitors remains a key partner for the Group regularly providing insight, advice and support across a range of matters.Bob Taylor, Group Chief Executive, First Ark Group.