corporate finance

Running head : PROBLEM SOLUTION : LESTER ELECTRONICS Problem Solution : Lester Electronics

Kimberly Monroe

University of Phoenix

Problem Solution : Lester Electronics

Introduction

This talks about four major companies in electronic industry LEI Shang-wa , TEC and Avral and a perspective merger between LEI and Shang-wa . An increasing competition in the industry has proposed this merger between the two companies . This deals with a through study of income statement and balance sheet of all the four company to find out a best target for LEI and also a major threat for this merger

. This studies the role of different players in the proposed merger between LEI and Shang-wa and also the risk factors have been studied This also talks abot the plans and its implementation for the merger

Situation Analysis

Mr . Lester , with the consent of LEI board of directors , has decided to merge with Shang-wa to form LEI-Shang-wa - but he must act quickly . TEC and Avral may soon initiate takeover moves . Shang-wa is LEI 's main parts supplier , and if TEC takes Shang-wa , LEI fears losing 45 revenue over the next five years

LEI 's decision to merge has revealed many potential problems that could derail the merger . First , LEI must determine Shang-was ' value to LEI Next , both companies must convince shareholders to vote for the merger A merger is sensible only if it meets strategic objectives , and if the benefits produce shareholder profits (Allbusiness , 2008 . Shareholders may prefer takeover by Avral and TEC if those companies can produce higher share price than the merger . LEI also needs to determine if the potential for higher profits could come from takeover by TEC , and if so find other potential benefits from the merger to convince shareholders to approve . If the stockholders approve the merger , LEI will need a comprehensive financial plan , which includes identifying medium and long-term financing for the large purchase . Finally , LEI must ensure that potential issues the cross-b merger could face are identified and mitigated , along with potential financial exposure from the merging of the two companies . These are significant challenges

Issue and Opportunity Identification

The potential problems that LEI and Shang-wa faces can be identified and mitigation plans created

Shang-wa vs . Avral - The greater value

LEI can use compare TEC and Shang-wa 's performance by using ratios to compare data provided in their financial statements , which are provided in Table 7 If we look at table 7 we can find out that TEC has a good current ratio as compared to Shang-wa and Lester . This is because , as we know that the standard current ratio is 2 :1 and Tech is just above the standard measure but Shang-wa is high above the standard whereas Lester is well below the 2 :1 . Here we can also see that TEC and Shang-wa is continuously trying to bring there current ratio nearer to standard Here the current suggest about the liquidity available with the company to pay its liability as soon it 's required

From the inventory turnover we...