Lester Electronics, Inc. (LEI), founded in 1978, is a small electronics company that distributes electronic parts to repair facilities, small local distributors, and two large domestic manufacturers that use capacitors in both consumer and industrial products. In 1978, LEI entered into an exclusive agreement to distribute Shang-wa Electronics (SE) products, a capacitor manufacturer. The contract must be renewed annually by both parties with a minimum order of one million dollars per year. The following will cover several of the issues, opportunities, goals, and visions of LEI which will help the company maintain and increase its revenue.
Issue and Opportunity Identification
John Lin, founder and chief executive officer (CEO) of Shang-wa Electronics, would like to retire in the near future. Lin wants to leave the company confident that Shang-wa will continue to be operated by a talented management team. Lin believes that he will be satisfied if Shang-wa is purchased by Lester Electronics, Inc. If Lester Electronics, Inc is unable to secure financing for the acquisition, Shang-wa may be acquired by Transnational Electronics Corporation.
Before Lester Electronics, Inc. can pursue and decide on means of financing the acquisition of Shang-wa, LEI must work jointly with Shang-wa to determine Shang-wa’s value. Several avenues of financing are available. Bernard Lester and his staff must analyze the available financing methods to determine which are most cost effective and will increase shareholders wealth, thus maximizing the value of the merger. Maximizing the value of the merger correlates with maximizing wealth where choosing to increase value will simultaneously increase shareholder wealth. Should the management team fail to diligently analyze the various forms of financing available, the value of LEI may be adversely affected. Ross, Westerfield, and Jaffe (2004), contend that “managers should choose the... [continues]
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