Mba 530

Problem Solution: Lester Electronics

In 1978 Lester Electronics entered into an exclusive contract with Shang-wa Electronics. The contract was an exclusive distribution agreement between both companies (University of Phoenix, 2007). With all the changes that are happening in many areas of the business world they would be looking for ways to grow their company either by acquisitions or mergers. The situation that was happening with Silver Socks is that they wanted to acquire Lester Electronics. LEI had to decide what would be best for the company since Arval is interested in acquiring LEI. In the situation with Transnational Electronics Corporation they had shown interest in acquiring Shang-wa which would cost Lester Electronics as they would lose their exclusive contract with Shang-wa and it would greatly affect the revenues of the company.

By merging with Shang-wa, Lester Electronics would have a greater opportunity to grow globally and maximize the shareholders wealth. Before the company can go any further on the possibilities of merging Lester Electronics should examine the financial ratio analysis. “This is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations, and attractiveness as an investment”(finpipe,2008,p.1). This information will be valuable when deciding on the merger with Shang-wa.

The Board of Directors for Lester Electronics will have to make a recommendation from all the information that would be presented to them during the process from medium and long-term financing options. The current situation is that Lester Electronics has to decide which situation offers them the most security, and which will benefit the company as a whole and allow them to reach their future goals.

Situation Analysis

Issue and Opportunity Identification

Lester Electronics entered into an exclusive United States distribution contract with Shang-wa in 1978 who was a small Korean manufacturer of capacitors. Since the agreement with Shang-wa companies