Problem Solution: Lester Electronics

Running head: PROBLEM SOLUTION: LESTER ELECTRONICS

Problem Solution: Lester Electronics

University of Phoenix

Problem Solution: Lester Electronics

Lester Electronics, Inc. (LEI) is a distributor of industrial and electronics parts in the United States. For the past 35 years, LEI has been engaged in an exclusive supply agreement with Shang-wa Electronics (Shang-wa), a small Korean electronics manufacturer. Changes in the industry, the market and personal lives of the CEO’s of both companies have led LEI to consider merging with Shang-wa. LEI is set to lost 43% of its revenue if they lose Shang-wa as a supplier. LEI is also being pursued for a possible takeover by Avral Electronics. The Board of Directors of LEI has approved the merger and directed LEI’s executive leadership team to develop a plan that will bring success to the firm and move forward with creating a financial recommendation with an analysis detailing all of the possible alternative financing options available to the company (University of Phoenix, 2008). After much analysis, both LEI and Shang-wa agree that a merger between the two companies would be the best solution to maintain their relationship and stave off takeover attempts by AVRAL and Transnational. The merger will create opportunities in the world market as LEI expands into other countries.The company will need to formulate a successful financial plan that optimize growth opportunities and maximize the shareholder’s wealth. However, there are several issues which LEI will have to address as a result of the merger.

Situation Analysis

Issue and Opportunity Identification

Lester Electronics, Inc. is a consumer and industrial electronics parts master distributor that has been in business since the late 1970’s. Shang-wa CEO John Lin began manufacturing capacitors in 1969. In 1978, John Lin entered into an exclusive supply agreement with Bernard Lester. Under the contract, Shang-wa granted LEI the...