Uop Mba540 Lester Solution (some Tables)

Problem Solution: Lester Electronics

Over the course of many years, the business relationship between John Lin, owner of Shang-wa Electronics and Bernard Shaw, CEO of Lester Electronics, Inc., has grown financially and personally (University of Phoenix, 2005). Shang-wa produces specialized capacitors for which Lester Electronics has the exclusive market in the United States. With the impending takeover by two outside firms, Transnational Electronics Corporation (TEC), and Avral Electronics, S.A., John has proposed a merger of Shang-wa with Lester Electronics. Bernard brought the proposal before the board of directors, who agree that the amalgamation would bring further financial success and now need recommendations and analysis of alternatives for financing this merger. The executive leadership team is tasked with analyzing financial strategies to accomplish this goal with the globalization of Shang-wa and Lester Electronics. “There is no more dramatic or controversial activity in corporate finance than the acquisition of one firm by another or the merger of two firms” (Ross, Westerfield, and Jaffe, 2005, p. 796). Acquisition benefits are referred to as synergies. “The acquisition of one firm by another is, of course, an investment made under uncertainty” (Ross, 2005 p. 795). Being global companies, legalities, tax issues and accounting structures must be accommodated. “In mergers and tender offers, the acquiring firm buys the voting common stock of the acquired firm” (Ross, p. 798). All potential key metrics will be used to determine the best possible financing solutions while maximizing shareholders wealth on behalf of both Lester Electronics and Shang-wa.

Situation Analysis

Issue and Opportunity Identification

Transnational Electronics Corporation and Avral Electronics both see growth potential and increasing shareholder value in acquiring Lester Electronics and Shang-wa. As global corporations, TEC and Avral have definite advantages over the slightly smaller corporation. Lester Electronics will lose shareholder value if the exclusive distribution of the component supplied by Shang-wa were to be controlled by an outside company. Costs and potential outside influence would hedge Lester’s financial gains. In order to defeat a takeover by either TEC or Avral, some type of synergy must be accomplished between Shag-wa and Lester Electronics. However, John Lin approached Bernard Lester with a partnership proposal. After due consideration, the Board of Directors for Lester Electronics has reviewed the financial metrics and concluded that a merger would be more financially suitable. Bernard and John Lin must come to some type of compromise and settle on a viable solution in order to avoid the potential risks of either Avral or Transnational gaining controlling interest in Shang-wa or Lester Electronics.