This year, EHM’s Executive Director, Ainsley Chapman, was a panelist at the Ontario Non-profit Housing Association’s annual provincial conference. In the session titled “Dating, Cohabitating and Marriage: The Three Stages of Amalgamation”, Ainsley Chapman shared learnings from EHM’s amalgamation with Portland Place.
Why are amalgamations being discussed so often?
During the 1990s, governments were investing heavily in housing – giving grants and mortgages to agencies large and small, and to communities of faith, to build mixed income housing. Government funding was easy to get, land was ample, the cost of labour and materials was cheap, and volunteers had determination and vision to see it through. What was inspiring about that era was that so many of these projects were conceived by every-day people in church basements, living rooms, and tiny, shared offices. We didn’t really know what we were doing – we just knew it HAD to be done. So, we did it. We built big. We built fast. We built well.
Three decades later, we are standing face to face with the ravages of time. Aging buildings are facing major systems failures, costly upgrades, and so many are using heating and cooling systems that are driving up costs and threatening the climate. The tenants who need housing today are becoming more complex – aging and mental health issues mean more support is needed to help them live independently. No longer can boards simply sign off on an annual budget and delegate the building’s management to a property management firm or small team of staff. Our modern housing economy means that a small operation just cannot sustain itself – but it is not for a lack of care, or lack of trying.
Three things start to happen. A once bright and well cared for building starts to get shabby and a backlog of repairs builds up. Tenants start to lose their independence as they age, or new tenants coming into the affordable units are bringing more complex mental health issues, and the overall quality of life of tenants’ declines. Finally, an exhausted volunteer board and burnt-out staff team is down to a skeleton crew, doing the work of many. Expenses – and risk, grow. This small business model just can’t survive in our modern economy.
Why leave the single life?
Mergers and amalgamations are one strategy that exhausted boards have been using to improve the quality of life of tenants and catch up on the repairs and upgrades so badly needed. It’s a way to find economies of scale, reduce back-end costs, and tap into new staff roles a small agency could never afford. And why the relationship analogy? Because moving through an amalgamation is just like moving through a new relationship.
Dating
The panel talked about how finding an amalgamation partner is a lot like finding a love partner. It requires knowing yourself – Who are you? What makes you special? What do you value? What are your goals? Then you can start meeting people and getting to know them. You want someone who will appreciate you for who and what you are. What does board and staff culture look like? What are your must haves? What are nice to haves? This stage is about talking to different people and getting to know each other. And when seeking a merger partner, it can literally mean starting with a meeting over coffee. No commitment needed! Some agencies do this themselves, while others like to bring in a “dating coach” or facilitator who can help ask questions.
Getting Engaged
So, your dating period is going well. Congratulations! You’ve told people you’re talking but there’s nothing locked in. But taking the next step means you need to find out if you are truly compatible. This is the period where both agencies do their due diligence. You look at each other’s finances and ask questions about how the other makes decisions about spending money. You meet your future in-laws – what will the new board look like and who will be on it? Whose name stays on the building? What happens when you blend your families? Employees from one organization may need a bump in pay or access to new benefits. Is there going to be duplication in roles? If you’re merging because of financial issues, there may need to be staff reductions. What is your philosophy around severance? This is when you can bring in experts to help – HR Consultants to look at contracts and severance costs; Accountants to figure out how to blend your accounting structure; Lawyers to recommend the pros and cons of how to set up the legal framework.
This is also when you start mapping the costs. What are the one-time costs required to negotiate and complete the merger? What are the costs to do immediate/urgent capital repairs? What does your annual operating budget look like? Is your municipality/service manager willing to help fund these one-time merger related costs? Hint – they often have a budget to help with this, because if a merger will strengthen an organization, it saves them money in the long run. For EHM’s amalgamation with Portland Place, the City of Toronto funded 100% of the amalgamation costs and helped with most of the urgent capital repair costs. The philosophy was that they wanted to remove all the barriers and risks to EHM. They will usually ask you for an LOI to show you’re committed before releasing funds.
Getting to the Happily Ever After
You’ve agreed to all the terms and ready to start signing documents! It’s important to have a communications plan (you can hire people to do that for you too!), for partners, funders, vendors, and staff. And like marriage, not everything will go as expected. You will find surprises, there will be misunderstandings, and you will realize that some of your early dating days were a little too rose colored. But like any relationship, if you bring honesty, an openness to listen, a willingness to be collaborative, you can work together to bring a building back to life and honor the legacy of its original visionaries.
Questions about Mergers and Amalgamations?
Ainsley will be happy to answer all your merger and amalgamation questions, and can put you in touch with other colleagues who had their own experience. Contact Ainsley at ainsley.chapman@evangelhall.ca or 416-504-3563 ext. 227
The full panelists include:
• Suzanne Le – Executive Director, Multifaith Housing Initiative
• Rebecca Roy – Executive Director, Satellite Community Homes
• Manal Sayid – Facilitator, Sayid Consulting