Lester Electornics

Introduction

Lester Electronics a small consumer and industrial electronics parts master distributor working in the United States was hit with the idea of losing there key supplier in Shang-wa an electrical capacitor manufacturer to rival Transnational Electronics a large manufacturer and distributor of electronic components company. Lester Electronics has seen Transnational Electronics grow its business lately through mergers and acquisitions and has now decided that Shang-wa fits well into the company’s long-range business plan. If Transnational Electronics were able to acquire Shang-wa, the acquisition would cut approximately 43% of Lester Electronics revenue thus forcing Lester Electronics to look for external investments to forge against a successful bid by Transnational. The board of directors decided to beat Transnational Electronics to the punch and acquire Shang-wa electronics themselves. The board believes strongly that combining with Shang-wa will forge against any loss of revenue and will overall be successful.

FedEx and Kinko’s

In 2004 FedEx, acquired Kinko’s a privately held document printing and coping business for 2.4 billion dollars combining the strength and logistic experience of FedEx with Kinko’s small business service model. (Gross, 2004) believes that this acquisition was a “timely response to the long-term decline in FedEx’s primary lines of business and also represents an attempt to reposition the company in the eyes of the customer.” FedEx do to the internet boom saw its revenues decrease because email provided a cheap and simple way to send documents instantaneously, which cut deeply into FedEx’s model of overnight delivery service model. Reasons very from company to company on why they choose to acquire another company but a company may decide to acquire another company because of the synergy that the other company will bring to the acquiring company.

One form of synergy comes from revenue enhancements; (Ross-Westfield 2005) wrote, “that a combined firm may generate greater revenue than two separate firms. Increased revenues may come from marketing gains, strategic benefits, and market power.” Revenue enhancements is the key reason FedEx decided to acquire Kinko’s because it would bring in further revenue and fit well into the companies long range strategic plans was the main reason FedEx was able to raise enough cash to acquire Kinko outright. According to FedEx, “Kinko’s fit well into the FedEx long term growth strategy in a number of ways: It is a magnet for small businesses which is a key market area for growth, and FedEx shipping services are available at more than 1500 locations.” Which would allow FedEx eat into UPS market share for ground distribution.

Kmart and Sears, Roebuck

Kmart and Sears, Roebuck have agreed to merger in a deal that has created a nation’s third largest retailer. The new company, named Sears Holding Corporation, will have more than 2,200 full-line and off-mall stores, and 1, 100 specialty retail stores with approximately $55 billion in annual revenue.

The $11 billion merger won immediate praise from analysts, who believed the combined operation would be better able to compete with rivals such as Wal-Mart and Target. The analysts called it a dream deal made in heaven. They said even if it were to fail, which they did not expect, both companies could fall back on a substantial real estate value.

The Sears and Kmart businesses will continue to operate separately under their respective brand names. “The combination of Kmart and Sears is extremely compelling for their customers, associates and shareholders, as it will create a powerful leader in the retail industry, with greatly expanded points of distribution, leading proprietary home and apparel brands and significant opportunities for improved scale and operating efficiencies”. (Tribune 2004)

The merger will enable them to manage the businesses of Sears and Kmart to produce a higher return than either company could achieve on its own. Both firms’ boards approved the agreement unanimously. Under the terms, Kmart shareholders will receive one share of new Sears Holdings common stock for each Kmart share. “Sears shareholders will have the right to choose $50 cash or a-half share of Sears Holdings valued at $50.61 for each Sears share.

The current value of the transaction to Sears’s shareholders is approximately $11 billion. Kmart and Sears shareholders, regulatory approvals and customary closing conditions subject to approved the merger.”