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Submitted by starckm on February 13, 2007
Category: Business
Words: 4815 | Pages: 20
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Running head: PROBLEM SOLUTION: LESTER ELECTRONICS INC.
Problem Solution: Lester Electronics Inc.
Marcella Starck
University of Phoenix
Problem Solution: Lester Electronics Inc.
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 been 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 Transational Electronics Corporation (TEC). Both companies are 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, 2006).
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.
Describe the Situation
Issue and Opportunity Identification
The first issue that Lester will have to deal with is to determine if they have the financial capacity to complete the merger with Shang-wa. Lester's financial managers should evaluate their cash flows to see if they have the money to either buy Shang-wa using the equity that they already have or to finance the purchase with debt. During this evaluation, Lester should evaluate the timing of the cash flows. If Lester decides to purchase...
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