Problem Solution: Lester Electronics Over the course of many years, the business relationship between John Lin, owner of Shang-wa Electronics and Bernard Shaw, CEO of Lester Electronics, Inc ., grew financially and personally (University of Phoenix, 2005). Shang-wa produces specialized capacitors for which Lester Electronics holds the exclusive market in the United States. With the impending acquisition by two outside companies, Transnational Electronics Corporation (TEC) and Avral Electronics, S.A., John proposed a merger of Shang-wa with Lester Electronics. Bernard presented the proposal to the board of directors, who agree that the merger will lead to further financial success and now need recommendations and analysis of alternatives to finance this merger. The management team is tasked with analyzing the financial strategies to achieve this goal with the globalization of Shang-wa and Lester Electronics. “There is no more dramatic or controversial activity in corporate finance than the acquisition of one company by another or the merger of two companies” (Ross, Westerfield, & Jaffe, 2005, p. 796). The benefits resulting from the acquisition are called synergies. “The acquisition of one firm by another is, of course, an investment made under conditions of uncertainty” (Ross, 2005 p. 795). As global companies, legal aspects, tax issues and accounting structures need to be taken into account. “In mergers and public offerings, the acquiring firm purchases the voting common stock of the acquired firm” (Ross, p. 798). All potential key parameters will be used to determine the best possible financial solutions while maximizing shareholder wealth on behalf of both Lester Electronics and Shang-wa. Situation Analysis Identification of Problems and Opportunities Transnational Electronics Corporation and Avral Electronics both see growth potential and increased shareholder value in the acquisition of Lester Elettronica and Shang-wa. As global companies, TEC and Avral have definite advantages over the slightly smaller company. Lester Electronics would lose share value if exclusive distribution of the component supplied by Shang-wa were to be controlled by an external company. The costs and potential outside influence would cover Lester's financial gains. To avoid an acquisition by TEC or Avral, some kind of synergy must be achieved between Shag-wa and Lester Electronics. However, John Lin approached Bernard Lester with a partnership proposal. After appropriate consideration, the Board of Directors of Lester Electronics reviewed the financial parameters and concluded that a merger would be most financially appropriate. Bernard and John Lin need to reach some kind of compromise and find a workable solution to avoid the potential risks of Avral or Transnational acquiring a controlling stake in Shang-wa or Lester Electronics..