Housing Technology interviewed senior housing experts from Clearview Systems, Itica, Northgate Public Services, Torus Group and Vantage Business Solutions on the role and impact of technology on housing providers’ mergers and acquisitions (M&A).
Existing technologies as M&A drivers
Although technology is now widely recognised as being fundamental to housing providers’ operations, for any two or more providers involved in a merger or acquisition, technology is unlikely to be the main catalyst but it is very likely to have a profound downstream effect both during and after the merger.
Liz Haworth, chief operations and transformation officer, Torus, explained, “When Torus was formed in 2015, there was a widespread IT review in order to standardise systems across the new group and enable the integration of its operations. While this didn’t drive the amalgamation decision, the basis of the business case was to create efficiencies in order to improve the customer experience, strengthen financial resilience and build more homes. As a part of that, IT is a key driver for transformation, as the enabler for integration and efficiency.”
Northgate Public Services’ director of housing solutions, Trevor Hampton, said, “The driver for most mergers or acquisitions is finance rather than technology. Ultimately, it’s about creating greater efficiencies and delivering more social value; things like IT infrastructure are secondary to those considerations.”
Clearview Systems’ managing director, Mark Hobart, said, “Given the investment in IT by all parties in a merger or acquisition, the opportunity to cherry pick best practice and preferred strategic outcomes from the combined IT estate would have to feature highly in decision making. It may also be the case that ‘best practice’ may not necessarily be that of the acquiring housing provider.”
Smoothing the path
Technology tends to play a prominent role once M&A decisions have been made as a means of making the actual merger easier and faster, as well as providing the solid foundations needed to then realise the merger’s intended goals and benefits.
John Doughty, director, Itica, said, “Much depends on the technology solutions in use within the different business entities. Some will already have some good migration tools and ‘data loaders’ in place to help with the heavy lifting in terms of data, but be prepared for a considerable amount of human intervention to correct data issues. As part of the due diligence process, assess whether you already have the skills in-house to migrate systems or if you’ll need help from external suppliers and other specialists.
“In terms of IT infrastructure, M&As are an excellent opportunity to look closely at your hosting and cloud services which could provide good economies of scale for the newly-formed organisation. Infrastructure monitoring and exploration tools can be used to stress-test the performance of the existing networks and hosting environments to identify bottlenecks and weaknesses that will need to be addressed.”
Haworth from Torus said, “I’m not sure if IT makes mergers easier, but it is critical to the integration process. Technology is key if you want move to a common operating model with common policies and processes and integrated teams. For example, at the start of Torus, the contact centre teams had two screens, depending on which landlord the call concerned; IT integration enables you to have one screen by creating ‘a single version of the truth’. Integrating data is critical to this and to realising the planned efficiencies faster.”
Navigating the ‘best of breed’ minefield
Northgate’s Hampton said, “The problems arise when IT is considered as a tactical tool rather than used in a strategic way; it’s the ‘encounter a problem and add another system’ approach to IT development. For example, a typical housing provider might have 150 separate applications to maintain for specifc business areas, so when a merger takes place, that complexity will double (at least at first), so making small tactical additions to solve specific issues will not generate efficiencies.
“An overall strategic look at IT is the best way forward because it allows you to streamline processes and standardise on a few systems that manage the majority of the work. The consolidation of peripheral systems into your core housing system is fundamental and a merger is the key opportunity to do this.”
Clearview’s Hobart said, “Aligning the IT strategy of two organisations takes time. Both organisations might have the same housing management system but that doesn’t mean they have implemented them in the same way, are on the same release or have pursued the same updates policy, before you even consider any bespoke versions or customisation.”
Itica’s Doughty said, “When each business entity has a completely different collection of ‘best of breed’ systems then consolidation will require some careful thought, with the prospect of temporary interfaces and integration being needed between most of the components. One of the biggest barriers here is a lack of standards-based integration between components for processes and data.”
Which post-merger systems?
Regarding the choice of post-M&A systems, Hampton from Northgate said, “The decision can be quite logical. If one organisation is much bigger than the other in terms of stock and employees then that may be the deciding factor. Alternatively, one organisation might have invested more in its technology and has a very modern system that works well whereas the other organisation might have much older systems that are expensive to maintain and nearing the end of their useful lives.
“It’s a more difficult decision when the two organisations are of a similar size and both have good IT systems. In that instance, you have to think perhaps about which systems are more scalable and flexible than the others.
“These decisions can often be dragged out because people focus on the detail rather than the big picture or they simply succumb to very understandable trait of not wanting to give up on a system that they know. To avoid this, it’s essential that IT is represented at board level during the M&A period and beyond.”
IT factors to consider
When asked about the most important IT factors to consider during M&A activities, Itica’s Doughty suggested that the combined M&A entities should establish:
- The costs of novating IT/service agreements to a new legal entity.
- The different types of licensing agreements, applicable costs, terms, renewal dates, notice periods and any cancellation fees.
- Any additional licence costs for increased users/properties/usage.
- The business ownership, resource pool and skill levels available to support the IT components.
- A map of all interfaces and integration points between each component and/or third parties.
- The data migration requirements to/from the different components, skills and knowledge of data sets, availability and costs of external assistance.
- The business reporting outputs incl. regulatory requirements.
- Any data-quality assessments.
- Training requirements for migrating users.
- Any reconfiguration requirements to cater for new business objectives.
Northgate’s Hampton said, “The most important thing is to focus on the quality of your data; quality issues in the data will multiply when you bring the two entities together. Also make sure that the IT systems are efficient and reduce the number of systems used where possible, and take the opportunity to move to the cloud if you haven’t already done so – that alone can offer you huge cost-savings in the long run.”
Business and IT alignment
When considering how housing providers should align their new business operations, culture and staffing requirement with IT, Vantage Business Solutions’ operations director, Rob Bryan, said, “You cannot de-link these things. IT is a key enabler of change but to get the most out of it, it must be part of a wider integration programme. The challenge for many organisations is that their IT capabilities are moving faster than their operational capabilities. While this represents an opportunity for IT to drive innovation, the pace has to be aligned.
“For example, robotic process automation offers a great opportunity to streamline processes, but there’s little point in automating ineffective processes or if key staff don’t appreciate how technology can free up time and drive greater efficiency.
“IT needs a board-level presence; the amounts of money being spent on IT and housing providers’ reliance on technology to deliver change perhaps warrants a re-think. Could the savings generated from merging other key board roles free up the funds for an IT champion on the board?”
Itica’s Doughty said, “The important thing is to make sure that the IT transition is a proper programme of projects and recognised as such with clearly-stated business outcomes, fully supported by all levels of the new organisation and wrapped with appropriate governance.
“Whatever the direction of travel, the key element is to carry out comprehensive capability diagnostics to identify gaps that must be filled in order to ensure the effective alignment of business and IT.”
Torus’s Haworth said, “My role includes IT, organisational development, frontline delivery and leading the transformation programme; the rationale for setting up my role was to ensure that it’s all linked together. For each workstream, someone from IT, communications, data, finance and organisational development are working in the business and supporting the teams in how they deliver the change.”
Business as usual or a blank piece of paper?
Is the M&A process a good opportunity to add new IT services and/or start with a ‘blank sheet of paper’ or should ‘business as usual’ take priority? Hampton from Northgate said, “In an ideal world, one would start with a blank sheet of paper but the challenge is that it then takes three to five years to build and realise a new IT vision. In the meantime, you would have to run two separate organisations under the same banner and you wouldn’t see any immediate benefits.
“Set out your vision and strategy but don’t forget your day-to-day ‘business as usual’ responsibilities – you have to continue to deliver high levels of service to tenants throughout the merger at the same time as working towards your longer-term vision.”
Clearview Systems’ Hobart said, “Priority should be given to processes that are underperforming. Either adopt the system that works or, if neither party’s systems work well enough, implement a new one, taking the opportunity to combine forces and make efficiencies where possible.”
Vantage Business Solutions’ Bryan said, “The question of business as usual versus a fresh start will ultimately depend on the wider strategy of whether each organisation wants a period of ‘getting to know each other’ or whether they decide to ‘jump straight in’. If they choose the former then that provides an opportunity to re-shape a new model that is better than either of the existing systems and services. If it’s the latter then often the ‘stronger’ of the two parties will subtly insist that the new partner adopts their existing systems, which may not necessarily achieve the best long-term results.”
‘Day one’ operations…
How do you achieve smooth operations from ‘day one’? Haworth from Torus said, “Testing is key, as is implementing the change in a systematic way. We moved from 27 systems to seven and went live with them all in just one day. This had an impact on performance and people and there were lessons to be learned; for example, we couldn’t give tenants accurate rent balances and our contact centre staff couldn’t answer tenants’ questions. You will always have teething problems but the more you test and pre-empt those problems, the better.”
Northgate’s Hampton said, “I would recommend picking, say, five champions at a management level from each organisation and bringing them together as an independent team that’s part of the new identity. This way, they lose their allegiance to their old organisations and become ambassadors for the new one.
“Share IT best-practice between the two organisations, ensure that IT is represented on the executive board, have clear 30, 60, 90 and 180 day plans from the start and from a communications perspective, make sure that all communications technology is in place from day one so the two organisations can collaborate and share documentation.”
When thinking about the most common technology pitfalls associated with M&As, Itica’s Doughty said, “By far the biggest ‘gotcha’ is data quality, particularly with legacy housing management systems. While these systems are often described as ‘cumbersome’, they are in fact usually highly configurable through parameters, codes, switches and other elements. This often leads to data fields being repurposed or ‘local’ configurations being created to cope with a particular tenant or property situation or to circumvent a lack of functionality in a particular area. These issues will take time to fix, but resolving data-quality issues and increasing data governance will pay dividends in the long term.”
Clearview’s Hobart said, “An over-arching pitfall to be aware of is making assumptions about the intended benefits arising from M&A activities that simply aren’t achievable because IT teams weren’t consulted at an early juncture.
“More specifically, a crucial first step is to ensure the correct alignment of information management, data quality and compliance initiatives. Fully understanding what data you have, how it will be compliant and of sufficient quality to support will ultimately determine M&A success because it’s the combined data of the new organisation that will drive all future decision-making.”
Torus’s Haworth said, “A lack of buy-in, a lack of testing and failing to pay attention to the data – these things really matter.
“In our experience, take time to consider the risks of a ‘big bang’ approach, and if that isn’t absolutely necessary, opt for a phased implementation. And if you can link together your data, IT, people and digital services, you can use the system implementation as a unique opportunity to transform your operating model and your services to tenants.”
Housing Technology would like to thank Mark Hobart (Clearview Systems), John Doughty (Itica), Trevor Hampton (Northgate Public Services), Liz Haworth (Torus) and Rob Bryan (Vantage Business Solutions) for their editorial contributions to this article. We would also like to thank Claire Lea from Sovereign Business Integration Group for her help with the outline of this article.