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Financial Analysis Of Alternatives To Different Companies

4433 words - 18 pages

Like America Online and Time Warner, Lester Electronics, Inc. and Shang-wa Electronics management teams need to carefully guide analysts to think about the synergies as a tri-level package: tactical, strategic and transformational. Lester Electronics, Inc. needs to be prepared for an increase of corporate expenses and an increase in merger and restructuring costs. LEI is in a hurry to merge with Shang-wa. When performing due diligence, LEI's research data should include not only Shang-wa's financial history but how the economic market will hold up between the merger and whether the company will continue to generate more business, and longevity in the market.LEI and Shang-wa may benefit from pooling their resources both financially and otherwise. If the companies go through with the proposed merger, there will be differences in how money is allocated. LEI and Shang-wa should look to the example of Kobe Steel and figure out a pooling method that will consolidate each division's balances into one account. The consolidated funds, if positive, can be distributed among the divisions for investments, capital purchases, or other business needs.The purchase of Redback Networks by Ericsson is a similar situation to Lester Electronics and Shang-wa. Ericsson purchased the manufacturer of a product that was needed to grow into the future. Some issues that are common in these types of mergers are the financial obligations of the parent company and retaining current employees' morale throughout the organization. If the acquiring company cannot maintain the employees throughout the purchase, the parent company faces the problem of producing a lower quality product and higher training costs for new employees.Bernard Lester should learn from DoCoMo's mistakes. Not all investments are wise decisions from a business perspective. John Lin wants Bernard Lester to take over Shang-wa completely. In theory, the merger would make sense; however, Shang-wa recently acquired large amounts of debt to purchase capital equipment. Lester Electronics Inc. is not strong enough financially to take on those types of liabilities. The projected financial statement of the consolidated organization does not show a promising future.Lester Electronics can benefit from this merger transaction by following the best practices by these two companies. The situation between CVS and Caremark is very similar to that of Lester Electronic, Inc and Shang-wa; both companies involved in the mergers are successful in their businesses. I wonder about the CVS/Caremark situation since both companies were successful before the merger and were not at risk of being acquired by anyone else. Looking from the perspective of "if its not broken, don't fix it" it makes me wonder why merge now. Things are little different for LEI and Shang-wa because those companies were at risk of being acquired by two bigger companies.The goal for Lester Electronics, Inc. and Shang-wa Electronics is to get the maximum value for...

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