Problem Solution: Lester Electronics

Essay by JerryS32University, Master'sA+, November 2007

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Problem Solution: Lester Electronics � PAGE \* MERGEFORMAT �1�


Problem Solution: Lester Electronics

MBA/540: Maximizing Shareholder Wealth

October 14, 2007


Problem Solution: Lester Electronics

Lester Electronics is a consumer and electronics parts master distributor that markets its products to original equipment manufacturers. For many years, Shang-wa Company has had an exclusive supply agreement with Lester electronics. Now, the CEO of Shang-wa is wishing to retire and has no formal succession plans for the company's management. At the same time, Shang-wa is being pursued for a takeover by Transnational Electronics Corporation (TEC). Lester Electronics and Shang-wa Electronics are both upset over the take over possibility. Lester is set to lose 43% of their revenues if they lose Shang-wa as a supplier. Lester Electronics is also being pursued for a possible takeover by Avral Electronics. After much analysis, both Lester and Shang-wa agree that a merger between the two companies would be the best solution to maintain their relations and stave off takeover attempts by the two other companies (University of Phoenix, 2007).

Lester believes that a merger between the two companies would be the best way to increase their shareholder's wealth. By merging, Lester will now have a global presence and should increase their market standing. However, there are several issues that Lester will have to address as a result of the merger.

Situation Analysis

Issue and Opportunity Identification

LEI goal is to expand beyond its current core. The environment currently surrounding their market creates a number of challenges ranging from hostile takeovers to increased competition. In their current situation, if LEI does nothing they will lose upwards of 45% of their expected revenue over the next five years. This lost would result from Shang-wa Electronics merging with Transnational Electronics Corporation. Additionally, LEI...