The big issue

Bryant and Beazer's Domus didn't even get off the starting blocks, but the two companies' respective acquisitions by Taylor Woodrow and Persimmon has generated speculation that there are more mergers to come among top and middle ranking players, speculation that the City has fuelled with its perpetual baying for industry consolidation. But is there more hype than substance to the speculation? Charterhouse managing director Steve Charnock is one analyst who does not subscribe to the popular view that the industry is in the grip of merger mania, or that it ought to be. "It's a possibility that there will be more, but the strategic big deals have been done," he says. Redrow has ruled itself out of the frame with its share buyback, and it is not easy to see who else would want to make a move. Of all the potential candidates only Westbury looks worth a better than each-way bet, in order to increase its activities in the South.

Apart from heeding the City call, there are more fundamental reasons for a housebuilder to go on the acquisition trail. "You should only do it for the right reasons: to move into a new geographical area or to buy landbank," says Charnock.

Beazer's massive landbank was undoubtedly one of the features that prompted Persimmon to steal the company from under Bryant's nose. The proposed move will make Persimmon/Beazer the country's top housebuilder with a potential capacity of more than 14 000 units a year, and it is boasting that it can produce savings of £20m a year (see box).

Persimmon has already expressed its commitment to Beazer Group's upmarket Charles Church brand; in fact chief executive John White has bullishly suggested the 500-unit a year division could double its output. But the future of Beazer's social housing operation under Persimmon's control is much less certain, as is the social housing operation's role as a partner in the Amphion Consortium, a partnership between Beazer and 23 housing associations to build innovative timber frame homes.

Taylor Woodrow/Bryant becomes a 6000-unit a year player and says it will save £10-15m from synergies (see box).

New-look Bryant has already announced its intention to have four geographic divisions - southern, central, northern and Scotland, with 12 regional offices. This means the loss of seven existing regional offices from the two uniting companies.

The rationale of mega housebuilders has however been questioned. "Logically it does not make sense. It gets harder and harder the bigger you get," says Charnock. Fred Wellings, author of Credit Lyonnais Securities Europe's Private Housebuilding Annual has also questioned the operational logic of getting bigger, although he does note that timber frame, one of Beazer's prime innovations, could allow for procurement efficiencies, and that another driver for consolidation could be the capital demands of urban brownfield development. But Allan Leighton, chairman of Wilson Connolly believes the industry ought to take the opportunity to consolidate. "I think the next 12 months will be a watershed for housebuilding," he says.