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Gap Analysis: Lester Electronics
Lester Electronics Inc. (LEI) is a consumer and industrial electronics parts distributing company that markets its products to small local distributors throughout North, South, and Central America and Europe. The company also markets to small to medium-sized original equipment manufacturers and repair facilities. In 1978 LEI entered into an exclusive distribution contract with Shang-wa Electronics. Lester Electronics (LEI) and Shang-wa have been close partners for nearly 35 years. LEI is faced with the decision to align with Shang-wa Electronics to establish a new capacitor manufacturing facility in a neighboring Asian country, acquire Shang-wa outright, or sell the firm to Avral Electronics, Inc., (University of Phoenix, 2007). “The issue translates into an opportunity to increase revenues through sources of synergy – revenue enhancement, cost reduction, lower taxes, and lower cost of capital,” (Ross, Westerfield, & Jaffe, 2005). Clearly, the firm must study the options carefully and make a decision timely in order to maximize wealth for its shareholders. The owners of these two companies are also close friends. As business owners they have worked hard to increase market share, maximize profits, and ultimately share their success. Difficult decisions will have to be made especially now that the boards of directors at Lester have given the green light to merge with Shang-wa. A hostile takeover looms in the horizon and LEI cannot afford to stand on the sidelines and sit idle since 40% of their revenues and products come from Shang-wa. The board has asked the leadership team to move forward with a financing recommendation
Situation Analysis
Issue and Opportunity ...