In the wake of Silicon Valley Bank‘s collapse last Friday, a consortium of private equity firms led by Bank of London has stepped forward with a formal proposal to acquire the UK arm of the failed US lender. The bank has also submitted the proposal to relevant authorities, including the Treasury and the Bank of England, as the British government scrambles to limit the fallout for British technology companies.
SVB Financial Group, which specializes in providing banking services to tech startups, suffered the biggest bank collapse in the US since the 2008 financial crisis. Given the significance of the lender to some customers, UK Finance Minister Jeremy Hunt had earlier warned of a potential significant impact on British technology companies.
“We will bring forward very soon plans to make sure people are able to meet their cash-flow requirements to pay their staff,” Hunt told Sky News, adding that the government is focused on finding a “longer-term solution that minimizes, or even avoids completely, losses to some of our most promising companies.”
The BoE has sought a court order to place the UK arm of SVB into insolvency, while OakNorth Bank, owned by SoftBank, and Abu Dhabi state-backed investment vehicle ADQ are also weighing bids to acquire SVB UK Ltd, according to a report by Reuters.
Meanwhile, advisory firm Rothschild & Co has been exploring options for the subsidiary, as the British Business Bank is considered for involvement to help address firms’ cash needs.
Bank of London CEO Anthony Watson, co-founder of the clearing bank, has emphasized that Silicon Valley Bank “cannot be allowed to fail given the vital community it serves.”
Over 250 UK tech firm executives have signed a letter addressed to Hunt, warning of an “existential threat” to the UK tech sector and calling for government intervention.
The government is reportedly considering involving the British Business Bank to support SVB’s customers, as some depositors may be eligible for compensation of up to £85,000 ($102,000), which is small relative to the deposits some startups had with the bank.
The pledge to find emergency support has been welcomed by tech firms and lobby groups, with startup industry body Coadec calling it “an acknowledgement of the scale of the challenge.”
The fallout from SVB’s collapse has also raised concerns in the US, with sources familiar with the matter saying that authorities are preparing “material action” to shore up deposits in Silicon Valley Bank and try to stem any broader financial fallout from its sudden collapse. Some financial industry executives and investors are growing increasingly concerned that the collapse of the bank could have a domino effect on other US regional banks if regulators do not find a buyer to protect uninsured deposits.
As the British government works to limit the fallout for companies from the bank’s demise, Bank of London and its consortium are among the contenders aiming to acquire SVB UK Ltd to mitigate potential losses for British tech firms.
