Lester Electronics Financing Alternatives

Lester Electronics Financing Alternatives

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University of Phoenix

MBA/564

Maximizing Shareholder Wealth

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June 21, 2007

Lester Electronics Financing Alternatives

Bernard Lester of Lester Electronics (LEI) is not convinced that a merger with Shang-wan is in the best interest of the company. Lester has requested the assistance of a professional consulting group to assess all alternatives including financing alternatives for Lester Electronics. The final report is in and the results to be discussed are as follows:

1) End State Goals defined;

2) Financing alternatives identified;

3) Evaluation: Advantages and disadvantages identified;

4) Risk analysis data compiled;

5) Alternative Matrix developed;

6) Risk Assessment and Mitigation chart developed; and

7) Financing solution proposed.

Detailed information can be found below on the above mentioned subject matter. LEI plans to utilize the consulting data to determine the direction and future of their corporation.

End State Goals Defined

Although Bernard Lester is leery of the board’s request to pursue Shang-wa as an acquisition, he has defined the end state goals of LEI-Shang-wa as the following:

• Become an international seller of electronic parts increasing sales by 50% in year 1

• Increase ROE to 30% over the next 2 years. (Debt to equity)

• Long term debt reduction plan

• Maximize shareholder wealth via increased stock prices and market share

In order to achieve these end state goals LEI considered many financing alternatives and narrowed their decision down to four main topics to present to the Board of Directors along with evaluations of each. Summary details can be found below.

Alternative 1 Identified - Management Buyout

LEI will consider a management buy-out option and bringing Shang-wa on as a subsidiary partner providing them with financial backing, leadership, and direction for their company. LEI have considered hiring an outside consulting company to help facilitate the management buy-out process. The consulting company will revamp the entire management structure of Shang-wa and act as a liaison between LEI and Shang-wa manufacturing. Bernard Lester and John Lin of Shang-wa, both find this alternative plan very attractive because of all the options involved and accomplishing the needs of both companies to achieve their end-state