The saying applies as much to the finance industry as it does in any walk of life, even more so in times of trouble: united we stand, divided we fall. And it is being repeated throughout the boardrooms of Britain's cash-strapped mutuals.

Gripped by consolidation fever, no fewer than five merger or acquisition deals have been struck or mooted by mutuals in the past 12 months. Yet according to Mike Rogers, the chief executive of LV=, the UK's largest friendly society, this could be only the tip of the iceberg.

“There is a huge long tail of mutuals,” he said. “Over time, you would expect some of them to fall away or be caught up by consolidation. We wouldn't be averse to it [consolidation]. We don't see it as part of our core strategy, but if we see the right opportunities, we would take them.”

Indeed, Mr Rogers has shown that LV=, the former Liverpool Victoria, will pursue acquisitions. Last month it completed the £150 million acquisition of Highway, the listed general insurer. LV= aims to be a top-five player in its chosen markets by 2012.

Building societies, owned by members rather than by shareholders, have been hit hard by the credit crunch. Some of the smaller players, for years a mainstay of mortgage lending, have found themselves shut out of the wholesale funding markets. Their weakened capital position and the beginnings of a recession have forced them into the arms of larger rivals.

Nationwide, Britain's biggest building society, is taking control of the Cheshire and Derbyshire societies. Britannia, the second-largest mutual lender, and the Co-operative's financial services unit have begun merger talks; Yorkshire Building Society is buying Barnsley; and the Chelsea and Catholic building societies have agreed to combine. Skipton's deal with Scarborough brings together the UK's sixth and seventeenth-largest building societies. Both sides made clear that the downturn in the housing market and wholesale funding conditions had taken its toll on Scarborough.

Mr Rogers said that Britain's financially strong mutuals were well placed to exploit the weakness in the banking sector and help to win back consumers' trust in financial services. “In the credit crunch, we've seen a forced restructuring,” he said. “It's been inevitable. In some ways the current environment has taken away a disadvantage for mutuals.

“The capital contained within them is suddenly more viable and important. It's not a slam-dunk, but there is something about the mutual model that makes the customer feel that they can trust you more.” Mr Rogers has reinvented LV=, which has about 2.5million members, since he joined in May 2006 after 19 years with Barclays. Having reviewed all of LV='s business lines, he closed the banking unit, shut down its network of financial advisers and tied sales force in favour of concentrating on insurance, investments and pensions. He drafted in John O'Roarke, the former boss of Churchill, to run general insurance. He bought Britannia Rescue, Britain's fourth-largest roadside recovery business, with an initial customer base of 300,000, and acquired the former GE Life flexible retirement unit owned by Swiss Re.

Of the Liverpool Victoria that he joined, he said: “It was somewhat of a sleepy mutual. It had fallen off the pace.” LV= is generating momentum now. In September it reported a 21 per cent increase in first-half general insurance sales to £206.5million, and life and pensions sales almost trebled. Its asset management unit launched 12 new funds over the period. Is there pressure to demutualise? Mr Rogers said: “We've always been pragmatic about the mutual status, although there are some customer proposition advantages. Our view is that as long as we have sufficient capital and can grow value for members, then the issue of mutuality is not a question for us.”

A friendly business

Like a traditional mutual society, a “friendly” is owned by its members rather than shareholders.

In Britain, friendy socieities were first recorded in the mid-16th century, although they rose to prominence during the Industrial Revolution almost 300 years later as a way for people to save or provide illness cover before the creation of the welfare state.

Although there are still about 200 friendlies in the UK, less than half actively sell savings and investment products. The Association of Friendly Societies (AFS), the trade body, has more than 50 members, covering about

six million customers and funds under management of almost £18 billion.

According to Martin Shaw, the AFS general secretary, the oldest friendly is the Incorporation Of Carters In Leith, which was established in 1555. The United General Sea Box of Bo'ness, a maritime friendly, was created in 1634.

The societies administer more than half, or about 1.3 million, of the UK's child trust funds. Savers can invest up to £25 a month tax-free in a friendly-only savings product.

Explore Management

• MBA