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Lester Electronics Incorporated (LEI) a United States (US) capacitor distributor and Shang-wa Electronics, a South Asian capacitor manufacturer have had a contract for over 35 years to manufacture and distribute capacitors both in the US and South Asia. The agreement however is in jeopardy with the recent inquiries of two companies Avral Electronics and Transnational Electronics Corporation (TEC) wanting to possibly acquire LEI and Shang-wa. If this occurs however, LEI stands to lose over 40% of its income because the agreement would be nullified with an acquisition. However, because LEI and Shang-wa's owners are friends as well as business partners they have determined to merge their companies. This will protect the interests of LEI and Shang-wa and will less the threats from Avral and TEC (University of Phoenix, 2007). Lester Electronics is facing some major challenges because they may lose one of their biggest suppliers, Shang-wa, who is responsible for almost 45% of their revenue. Moreover, Lester Electronics is also being pursued by Avral Electronics to expand Arval's distribution network in the US market. In a situation like this, companies can often learn from other company's examples in similar situations. One of the companies Lester Electronics can look up to is Amazon and how Amazon developed a relationship with Borders six years ago which has helped Amazon tremendously in improving their awareness in the industry.
The first concern that Lester should consider is checking whether or not they have enough financial capacity to carry out the merger with Shang-wa. The financial managers of Lester need to evaluate the company's cash flows to know if they have enough money to either buy Shang-wa ...