Problem Solution: Lester Electronics
...partake in merger activities as a growth strategy. Mergers serve to motivate and provide companies the opportunity to increase the value of the combined enterprise. Additionally, mergers also serve to increase market share, gain competitive advantage, and improve shareholder value.
Lester Electronics, Inc. (LEI) has finally decided to merge with its long time supplier, Shang-wa Electronics. LEI must develop a course of action that will address firm value and financing sources. At the same token, LEI must make certain that this merger will not negatively impact the shareholders as they will want to know the short term effects of this merger as well as the financial performance of the combined enterprise in the long run. Furthermore, LEI will need to consider the combined capital structure post merger by having the CFO decide if the funds are available and how necessary funds can be raised. Also, LEI will need to determine how much it can afford and the capital structure most appropriate for the combined enterprise. This paper will address these issues, risks associated with decisions made by LEI and the end-state vision that will assist in a more effective financial strategy, which will better position the company to continue as a leader in the electronics market.
Situation Analysis
Issue and Opportunity Identification
Having a strong management is important to the success of a business but it is equally necessary for a firm to have adequate capital. If LEI does not have enough capital, the firm will need to use financing. It is most important that the CFO determines the appropriate type of financing as well as deciding on the correct amount of financing needed. LEI can consider several ways of raising financing, which include self funding from existing cash flows, debt funding borrowed from others, and equity funding raised by selling to others.
One issue...
View Full Essay
