Two of the recent financial transactions include the Incline therapeutics Inc sales to the Medicines Company amounting to three hundred and ninety million dollars in January 2013, and the recent acquisition of Palomar by Cynosure Inc for two hundred and ninety four million dollars. Financial intermediaries and especially banks played a significant role in these huge transactions. Banks acted as the financial custodians in the two transactions, which were too huge to be conducted in cash terms. The transactions took place between the bankers of the four organizations in real terms. The Medicines company banker transferred the funds for payment of the transaction to the Incline therapeutics’ Inc banker; similarly, Cynosure Inc banker paid the money for the acquisition to the banker of Palomar. Banks play a crucial role in huge financial transactions, which cannot be possibly paid in cash, to prevent frauds that may occur if the transactions were conducted in cash, Teichova & James (2002).
Banks maintain financial accounts of then companies and transact on their behalf. They also offer financial advice and technical assistance to their clients when necessary. In the absence of financial intermediaries, the two transactions above would take place exclusively between the companies. This poses a threat of possibility of occurrence of fraud in the course of the transactions by unscrupulous company officials who may want to fill their pockets because it may be hard to control the massive funds that are exchanged. Without financial intermediaries, it would also mean that the transactions be inevitably be carried out in cash terms. This poses a substantial risk to the parties in the transactions since it is easy for the cash to be lost in transit. These risks are prevented using financial intermediaries in the transactions in which such risks are significantly cut down, (Karels & Arshadi, 1997).
References
Recent corporate transactions, available at: http://www.leerink.com/investment-banking/recent- transactions.aspx.
Karels, V.G. & Arshadi, N. (1997). Modern Financial intermediaries and markets. USA: Prentice Hall
Teichova, A. & James, H. (2002). The role of banks in interwar economy. UK: Cambridge Printing Press
