Mba 540 Benchmark

Brian Strauss

MBA 540

Introduction

Lester Electronics is a consumer and electronics parts distributor that markets its products to OEM specifications. Shang-wa has an exclusive supply agreement with Lester Electronics. The CEO of Shang-wa is wishing to retire and has no plans for the company's management and future. Moreover, Shang-wa is being pursued for a hostile takeover by Transitional Electronics Corporation (TEC). Neither company is happy about the possibility of a takeover. Lester electronics will lose almost 45% of its revenues if it loses Shang-wa. In contrast, Lester Electronics is being pursued for a hostile takeover by Avral Electronics. As a result, Lester and Shang-wa feel the best strategy for both companies would be to merger. Lester could seek to acquire Shang-wa outright. This would give them the growth needed to fend off Avral's plans to takeover Lester. It will also secure their investment in Shang-wa.

Benchmarking: AT&T Bid to buy of BellSouth

In my benchmarking I studied the potential acquisition of BellSouth by AT&T. The merger between the two companies will not only have a major impact for local and long distant phone companies but it will also have a major impact on wireless. BellSouth owns Cingular Wireless which is one of the largest wireless providers. Cingular's rival is Verizon Wireless. In an article posted by CNET News.com, AT&T is looking to buy BellSouth for 67 billion. "AT&T became the largest phone company in the United States after local phone company SBC Communications acquired long-distance carrier AT&T last year for $16 billion. The company, which changed its name after the acquisition was completed, serves 13 states, mostly throughout the western and southwestern parts of the country. Combined with BellSouth, the third-largest local phone company in the country, AT&T will pick up another nine states in the Southeast to provide service in a total of 22 states. The combined company would generate about $130 billion in sales and serve nearly 70 million local phone customers. In addition, AT&T will take full control of Cingular Wireless, a joint venture owned by AT&T and BellSouth. AT&T already owns 60 percent of Cingular, which is considered the largest cellular phone company in the U.S., providing service to more than 54 million subscribers in the United States." (Reardon)

A merger of this size could make Verizon very nervous due to the advantages Cingular will have over the market. In contrast to the Lester and Shang-wa merger, Verizon could become a target of a hostile takeover it shareholder feel the company will lose market share due to Cingular's new position. "Verizon could potentially lost market shares if the acquisition is completed. "AT&T's latest move will likely have repercussions throughout the industry. For example, it could force Verizon to make a play for Qwest Communications, the fourth surviving