"In a challenging economy, it is often difficult to sustain a worthwhile social service mission without revenue streams to execute mission-driven programs."
In an economy slowed by recession and federal sequestration, not-for-profit enterprises are finding that mergers, acquisitions and collaborations can grow value, enhance services and generate new revenue while better serving stakeholders.
Lighthouse for the Blind-Saint Louis, also known as LHB Industries, is an excellent example of a not-for-profit entity functioning like a for-profit company in order to preserve and advance a meaningful social services mission. LHB is a 501(c)3 organization founded in 1933. Today, it helps children and adults who are visually impaired maintain dignity and independence by offering employment, education and support services. It is also a manufacturing, assembly and packaging enterprise. Its legally blind employees assemble, warehouse and distribute emergency preparedness kits, medical kits, catheters, aerosol and liquid paints, aerosol and liquid cleaners, adhesives, eco-friendly products and others to government and business customers, and to consumers nationwide. (www.lhbindustries.com)John Thompson, LHB president, says, "Many non-profit organizations felt the impact of economic recession and government sequestration. We chose to boost our commercial business to offset losses from government and military contracts by evaluating potential acquisitions of established for-profit companies whose operations would be a good fit for us and create revenues to support our non-profit mission. Our two recent acquisitions are helping us achieve that goal."
Today, LHB is generating more revenues, sustaining employment and enhancing community services since its February 2014 purchase of all assets from the emergency survival kit production company Quake Kare, Inc. Quake Kare provides custom- and pre-packed disaster preparedness kits for virtually any type of crisis such as earthquakes, hurricanes, tornados, blizzards, floods, accidents, terrorist attacks and building lock-downs. (www.quakekare.com)
In June, 2015, LHB acquired all assets of Val-A Chicago, Inc., producer of the Tear Mender brand of non-toxic, all-natural adhesive and sealants for repairing clothing, fabrics, footwear, leather, upholstery, vinyl and other items for indoor and outdoor use. (www.tearmender.com)
LHB currently employs 47 people who are legally blind in two assembly and packaging plants in St. Louis County to assemble, pack and ship Quake Kare and Tear Mender products, as well as LHB's flagship products. All sales revenues directly support LHB's 16 Blind Community Outreach Programs called "See the Future" programs. LHB's "See the Future" programs provide support and resources to children and adults who are legally blind and visually impaired in Missouri and Southwestern Illinois.
"Like for-profit businesses that want to be successful, not-for-profit organizations must operate strategically and efficiently to sustain their mission," Thompson says. "In a challenging economy, it is often difficult to sustain a worthwhile social service mission without revenue streams to execute mission-driven programs."
"Our acquisition and integration of Quake Kare and Tear Mender are natural expansions of LHB manufacturing operations because kit and product assembly is one of our core competencies. Quake Kare and Tear Mender give us more exposure in commercial retail markets in addition to our current business in government and military sales," Thompson says.
To complete the acquisitions, LHB followed legal processes as would typically occur in a for-profit acquisition deal. This began with discussing basic terms of the acquisition and drafting a non-binding letter of intent outlining threshold terms of the transaction as a basis for preparing the definitive agreement, including a mutual confidentiality provision.
Legal and business due diligence and the letters of intent were handled by LHB's attorney to confirm the legal status of Quake Kare and Tear Mender authority to make the sale. In addition, the legal process required representations of warranties in the purchase agreement relating to the businesses, defining purchase price, payment terms, and describing the assets LHB would acquire.
Brian Houser, LHB's director of sales and marketing, says. "Quake Kare has been busy ever since a fleet of semi trucks unloaded Quake Kare inventory in St. Louis. (Quake Kare was formerly based in California.) "Our sales spike whenever an earthquake, bad flood or destructive tornado occurs. Our phone lines ring whenever disaster happens," Houser says.
"Our acquisition of Val-A Chicago, Inc.'s Tear Mender products provides LHB with a line of adhesive and sealant products that are well known and popular with consumers," says Houser. "It's a good fit for us, and Tear Mender sales have been increasing ever since we acquired the company's assets." Tear Mender products are sold by retailers including Ace Hardware, True Value Hardware, Rural King, Duluth Trading, JoAnn Fabric, Hancock Fabric, as well as Home Shopping Network (HSN) and Amazon.com. They also can be purchased via Tear Mender's website.
Thompson says, "With Quake Kare and Tear Mender, Lighthouse for the Blind-Saint Louis is demonstrating that it makes good sense for non-profit entities to pursue opportunities to enhance their service missions with creative new approaches for strategic acquisitions and collaborations that can generate revenues to support social service programs.
"We are very proud of our skilled employees in both of our production plants, and we are proud of our mission-specific staff members who develop, sustain and provide our meaningful programs for the blind community in Missouri and Illinois."
For information about Lighthouse for the Blind-Saint Louis employment, education, community services and programs, call 800.542.3697 or 314.423.4333, or see the website www.lhbindustries.com
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