Problem Solution: Lester Electronics
Over the course of many years, the business relationship between John Lin, owner of Shang-wa Electronics and Bernard Shaw, CEO of Lester Electronics, Inc., has grown financially and personally (University of Phoenix, 2005). Shang-wa produces specialized capacitors for which Lester Electronics has the exclusive market in the United States. With the impending takeover by two outside firms, Transnational Electronics Corporation (TEC), and Avral Electronics, S.A., John has proposed a merger of Shang-wa with Lester Electronics. Bernard brought the proposal before the board of directors, who agree that the amalgamation would bring further financial success and now need recommendations and analysis of alternatives for financing this merger. The executive leadership team is tasked with analyzing financial strategies to accomplish this goal with the globalization of Shang-wa and Lester Electronics. "There is no more dramatic or controversial activity in corporate finance than the acquisition of one firm by another or the merger of two firms" (Ross, Westerfield, and Jaffe, 2005, p. 796). Acquisition benefits are referred to as synergies. "The acquisition of one firm by another is, of course, an investment made under uncertainty" (Ross, 2005 p. 795). Being global companies, legalities, tax issues and accounting structures must be accommodated. "In mergers and tender offers, the acquiring firm buys the voting common stock of the acquired firm" (Ross, p. 798). All potential key metrics will be used to determine the best possible financing solutions while maximizing shareholders wealth on behalf of both Lester Electronics and Shang-wa.
Situation Analysis
Issue and Opportunity Identification
Transnational Electronics Corporation and Avral Electronics both see growth potential and increasing shareholder value in acquiring Lester Electronics and Shang-wa. As global corporations, TEC and Avral have definite advantages over the slightly smaller corporation. Lester Electronics will lose shareholder value if the exclusive distribution of the component supplied by Shang-wa were to be controlled by an outside company. Costs and potential outside influence would hedge Lester's financial gains. In order to defeat a takeover by either TEC or Avral, some type of synergy must be accomplished between Shag-wa and Lester Electronics. However, John Lin approached Bernard Lester with a partnership proposal. After due consideration, the Board of Directors for Lester Electronics has reviewed the financial metrics and concluded that a merger would be more financially suitable. Bernard and John Lin must come to some type of compromise and settle on a viable solution in order to avoid the potential risks of either Avral or Transnational gaining controlling interest in Shang-wa or Lester Electronics.
This essay examines the vertical chain of the recent strategic alliance of BlackBerry and Foxconn. The examination utilizes the make-or-buy issue tree to uncover the strategic and economic rationale for the vertical chain. The essay then goes on to evaluate the vertical chain using the concepts of Transaction Cost Economics, revealing any potential economic hazards that could have a negative impact on the efficiency and effectiveness of the vertical chain.
In the year of 2005, the companies eventually found a way to make it easier for the companies to combine without having any major issues or problems. Unfortunately, around the year of 20010 the merging com...
The second section will be a report to the board of directors that identifies a synergistic acquisition candidate for Target. This section will identify Target's proposed acquisition terms, price, financing, and potential negotiation strategies. This segment will also include price / earnings ratios, book value, current market value, and liquidation based on the supporting financial data. Also in this part will be a discussion of the general and specific risks inherent in an acquisition strategy.
Andrews is a sensor manufacturer in the market. While the company has been unable to develop a straightforward competitive advantage over the course of the past three years, the competitive landscape of the market has become a significant source of concern for the company’s leadership. There are other companies out there who produce better products, or are able to compete strictly based on price cuts. It came to the CEO’s attention that there is an opportunity for Andrews to shift a large portion of its production to an offshore location. This decision will not only allow Andrews to reduce its labour and material costs, but will also allow for improved distribution practices.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Since the company was slow in both innovation and growth, it was time to make a life-changing decision for the company. Atul insisted on keeping the culture of debt-free and not accepting any external capital (for the past 15 years), however, the company was not doing great during that time. The case described that TEOCO primarily focused on North America telecom carriers, because of globalization, the company needed to expand its business worldwide. Therefore, TA Associates was the right choice for TEOCO in favor of equity investment. Partnering with TA Associates will help to strengthen TEOCO’s current financial condition as well as provide a strong support for the global network of relationships, according to Calo et al. (n.d.).
The United States located electronic company Electrocorp faced the problem of declining profitability due to rising production costs, specifically high wages, costly worker's safety and environmental standards. In order to solve this problem Electrocorp is deciding whether to relocate some of their plants to South Africa, Mexico, or the Philippines.
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
During the 1990s, each company experienced specific difficulties to their market share. Both companies struggled to reestablish themselves in the global consumer electronics world. As the year 2000 came around, new CEOs at both companies came up with even more complicated initiatives and reorganizations. Outsiders wondered how each company’s internal changes would affect their endless competitive battle in the industry.
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
Hammond Cards, Inc. is a small player of the greeting cards industry in the United States of America due to the fact that their annual revenues equate to less than 1% of the industry leaders as described in the case. In their effort to stimulate growth, however, Wendy Hammond has employed me to analyze the potential acquisition of another company, Creative Designs. My analysis will firstly look at the main issue behind this acquisition and then further break it down into sub-issues that I will address individually. Since both of these companies follow a different strategy I will evaluate the two different companies and discuss the implications of their strategies on the merger. I will then perform various cost analysis to determine the cost structures of the two firms which will help me identify whether Wendy’s intentions can be carried out. In my analysis I will aim to figure out the practical capacity of the firms and get an indication on whether their current operations are using the optimal level of capacity and minimizing waste. This data will help me with my strategic recommendation of acquiring Creative Designs and fitting it in with the current strategy of Hammond C...
Before the alliance the two firms were in totally different market and they were also in different country but the industry was of same type. Both of the firms were aware about their future plan and lacking.
The topic under review is strategic alliances. This particular form of non-equity alliance between firms in the same industry (competitors) is becoming an increasingly popular way of conducting business in the global environment. Many different reasons of why such alliances are occurring have been recognized. These include: the increasing globalization of the world's economy resulting in intensified global competition, the proliferation and disbursement of technology, and the shortening of product life-cycles. This critique will use Kenichi Ohmae's viewpoint on strategic alliances as a benchmark for comparison. Firstly, a summary of Ohmae's article will be provided. Secondly, in order to critique Ohmae's opinion, it will be necessary to review other literature on the topic. Thirdly, a discussion of the various viewpoints and studies, that have hence arisen, will be discussed in detail. Finally, conclusions will be drawn with implications for companies operating in today's global environment, together with suggestions for future research on strategic alliances.
Tyco International was founded in 1960 and was regarded as an important electrical and electronic components provider, fire protection system maker and electronic security service provider. It is a diverse producing and serving corporation. Tyco has done business in over 1000 locations in 50 countries and hires 69,000 employees around the world (TYCO, 2012). Tyco International has expanded rapidly and broadly since its IPO in 1973 and has numerous companies among the Fortune 500. The firm’s revenue increased from $3.1 billion in 1992 to over $40 billion in 2004, with the firm’s market value estimated at over $100 billion (TYCO, 2012). Tyco has made numerous acquisitions, including 40 acquisitions since the 1980s.
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.