Mba540 Lester Electronics Gap Analysis
...Incorporated (LEI) is looking for viable options for growth. The management team of LEI must carefully analyze their current financial position and their long-term goals in order to successfully create growth for their company. In reviewing their current options, LEI must define their intended growth strategies, evaluate the stakeholders, and look for opportunities to increase shareholders value in their company. LEI is currently evaluating the merger with Shang-wa Electronics (SEI). With the completion of this merger LEI would expand their current product base. Jointly LEI and SEI need to set new financial and corporate goals and strategies. The results, interpretations and implications for LEI are discussed in the following pages.
Situation Analysis
Issue and Opportunity Identification
John Lin, CEO of Shang-wa Electronics, wants to form a partnership with Lester Electronics and establish a new manufacturing facility in a neighboring Asian country. One of the issues that involve the merger that Lester will need to face is that Transnational Electronics Corporation (TEC) has approached Shang-wa with a hostile takeover bid. If Shang-Wa is acquired by TEC then LEI will lose a contract with his main supplier. This will cause LEI to lose 43% revenue over the next five years. Bernard Lester would like to avoid a hostile takeover by TEC and partner with Shang-wa Electronics. Lester Electronics can take this opportunity to merge with Shang-wa and benefit both companies. Lester would maintain the supply of capacitors and Shang-wa would gain financial and management support.
Lester Electronics needs to get the stockholders of each firm, Lester Electronics and Shang-Wa, to vote for the approval of the merger. Lester has to determine if they have the financial capacity to complete a merger with Shang-Wa. Excess financial capacity is free cash flow plus excess...
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