Lester Electronics Financing Alternative Benchmarking
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The first concept that is relevant to the financing alternative benchmarking with Lester Electronics is financial capacity. When it comes to mergers, a company must have enough financial resources to fund the acquisition (Ross, Westerfield, & Jaffe, 2005). The two companies that were benchmarked, namely, Fidelity Bank and Dow Jones, exemplify the importance of possessing ample financial support to be involved in a merger.
The Fidelity Bank of Nassau, Bahamas is recently negotiating a cross-border acquisition deal with the Royal Bank of Canada. This acquisition deal is the first of its kind, involving parties that span a wide geographical distance. The joint venture, dubbed as the Royal Fidelity Merchant Bank & Trust Limited, needed about U.S. $1 billion worth of client assets. As a matter of fact, Fidelity’s CEO and chairman Anwer Suderji states that more than half of Royal Fidelity’s assets are under custody in order to fund the merger between two banks that are miles apart.
Dow Jones is also currently considering a merger deal with Rupert Murdoch’s News Corp. Murdoch’s strategy is to offer to purchase shares on the Wall Street Journal from Dow Jones, the majority of which is owned by the Bancroft family. The total cash bid for the Wall Street Journal amounts to U.S. $5 billion. At the standing offer of $60 per share, the Bancrofts and Dow Jones are apparently not quite satisfied. They are eyeing on persuading Murdoch to increase the offer to get on with the deal. Murdoch, on the other hand, consistently resisted the demands of Dow Jones to raise the offer, indicating that News Corp. may not have enough financial capacity to do so. Nevertheless, Murdoch remains firm in his decision, stating about the deal to the Bancrofts, “take it or leave it.” Financial capacity to address demands is certainly a crucial factor in this acquisition plan.