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Mergers, acquisitions, joint ventures, and corporate restructuring are becoming an integral part of the corporate financial world. Corporations are using such methods to allow them to achieve company strategies dealing with situations as diversification, market entry, and new technology in an effort to maximize shareholder wealth.
Issues
Lester Electronics Inc. (LEI) is a medium sized consumer and electronics parts master distributor with current revenues of about $500 million a year. LEI has a long-standing relationship and has successfully been doing business with Shang-wa Electronics, a small manufacturer of capacitors based in Korea. Shang-wa was recently approached with an acquisition offer from Transnational Electronics Corporation (TEC). If Shang-wa accepts the offer, LEI will be faced with losing 43% of their revenue. In the interim, LEI is also being approached by Avral Electronics with an acquisition offer.
Benchmarking Analysis
Through the process of benchmarking companies that have been through similar situations as Lester Electronics, these researchers have been able to analyze the actions of the benchmarked companies and translate that into possible solutions for LEI. Some of the possible alternative solutions identified were for LEI to acquire Shang-wa, for LEI and Shang-wa to enter into a joint venture, or for Mr. Lester to sell LEI to Avral and liquidate its assets. All of the solutions have their own unique benefits, so the process of analyzing other companies that have faced similar issues is vital in helping LEI decide which solution best fits their current situation.
One of the first solutions that these researchers analyzed was LEI’s acquisition of long time supplier Shang-wa. Acquiring Shang-wa would have many benefits for LEI, assuming they could afford the acquisition. First, they would be able to implement cross-border growth strategies by bringing in a manufacturing division to their company...