Gap Analysis: Lester Electronics
Lester Electronics, Inc., a distribution company in the United States, and has a contract with Shang-wa Electronics, a Korean manufacturer of capacitors. Under the contract, which must be renewed annually, Shang-wa granted, Lester the exclusive right to sell capacitors in the United States for 65 years, as long as Lester maintained a minimum annual purchase of $1 million wholesale; as result, Shang-wa is Lester’s primary supplier of capacitors for the U.S. market. In exchange, Shang-wa cannot knowingly sell its capacitors to anyone intending to market to U.S. buyers. Lester added additional components to its product line. Shang-wa’s capacitors are well known in the U.S. market that is why Transnational Electronics Corporation, a large manufacturer and distributor of electronics components wants to acquire Shang-wa. On the other hand Avral Electronics equipment and component parts manufacturer headquartered in Paris wants to acquire Lester, because they want to market their product in the U.S. market (University of Phoenix, 2008).
Situation Analysis
Issue and Opportunity Identification
Lester Electronics, Inc. is a distribution company in the United States, and they have a contract with Shang-wa Electronics, which is a Korean manufacturer of capacitors. Under this contract which is renewed annually, Shang-wa is Lester’s primary supplier of capacitors for the U. S. market. Lester’s revenues are approximately $500 million a year. The next issue is that Transnational Electronics is interested in a hostile take-over of Shang-wa, if this happens it would mean a large drop of 43% of the revenue for Lester’s Electronics. This would result in financial distress for Lester’s and could through them into bankruptcy. By merging the two
companies they will be able to build their company and increase the wealth of the shareholders, while maximizing the potential for growth.
Assess Financing Needs for Wealth Maximization
What is Financial...