Intermediaries serve the role of servicing savers and borrowers to achieve their desired pattern of inter-temporal consumption. Instead of savers and borrowers having to deal with each other on an individual basis, they deal with the intermediary. The intermediary realizes a profit by lending at a higher rate than it pays savers (the spread).
For the Scenario below, you are the CFO. Share with us what you explaining to your fellow C suite members and the board of directors.
Scenario:
Boudin Wireline Services, Inc. in Estelle, Louisiana is contemplating an acquisition of Lagniappe Consulting, LLC, a complimentary company based in Lafayette, Louisiana. Boudin is an S Corporation and Lagniappe is a limited liability company. The venture capitalist believe the structure of both companies is not correct to do an initial public offering of $100 million. The venture capital firm has suggested a C corporation. The venture capitalist will be taking an equity kicker in the deal, three board seats, and have expressed their desire to maximize profits. The CFO meets with the other C suite members and the board of directors to explain what is happening.