HSBC acquires Silicon Valley Bank UK to protect start-ups from going bust

The acquisition of Silicon Valley Bank UK will allow HSBC to expand its presence in the technology industry and further develop its fintech capabilities.

Image: Pefkos/Adobe Stock

After the sudden collapse of Silicon Valley Bank in the US, HSBC Holdings sealed the purchase of SVB’s UK arm for £1 ($1.21 USD). The deal, which came after prolonged hours of negotiations involving the UK government, regulators and a consortium of private equity firms, was a move to save Britain’s technology start-ups from an imminent collapse.

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Financial crisis of British technology companies

After California-based Silicon Valley Bank could no longer meet US withdrawal demands, the potential collapse of SVB UK – which reportedly has around 3,300 UK clients, including start-ups, venture capital-backed companies and capital – created fears for Britain’s technology and life. science industries.

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UK technology companies had experienced a degree of cash crunch, which left some unable to access the funds they had in SVB UK. The Daily Mail reported that tech companies in the UK, including Pinterest and online retail giant Shopify, were affected as they struggled to make payroll withdrawals.

The situation prompted the Bank of England to issue a statement on March 10 about its readiness to apply to the Court to place SVB UK into bank insolvency proceedings if there was no significant intervention.

However, with HSBC’s activation, tech leaders and startup founders are expected to continue banking as usual, as all deposits are secured.

“This action has been taken to stabilize SVB UK, ensuring the continuity of banking services, minimizing disruption to the UK technology sector and supporting confidence in the financial system,” the Bank of England said in a press release after the deal was signed .

“This acquisition makes excellent strategic sense for our UK business,” HSBC Group CEO Noel Quinn said in a statement. “It strengthens our merchant banking franchise and enhances our ability to serve innovative and fast-growing companies, including in the technology and life science sectors, in the UK and internationally.

“We welcome SVB UK clients to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.”

To what extent has the UK tech industry been affected?

SVB UK has been acting as a tech-friendly financial institution, helping with lending and savings for many tech companies in the UK According to The Economic Times, around 16 tech and life sciences companies in Europe have disclosed over £156.10 million ( US$190 million) in exposure to SVB in the UK and US In the UK, some of these companies were affected prior to the HSBC acquisition.

Trustpilot Group, a global rating platform, confirmed that the company was unable to transfer $18 million of the total money held at SVB UK. Another technology company, Diaceutics, was unable to move its funds out of the bank when news of a possible collapse spread. The situation has forced Diaceutics to temporarily suspend trading on AIM.

Following these events, around 210 companies and start-ups wrote an open letter to UK Chancellor Jeremy Hunt at the Treasury, asking for financial help.

The letter was signed by about 140 CEOs and founders of well-known brands, including Zoom Video Communications, GitHub, Stripe, DocuSign, Atlassian, Coursera, Slack Technologies, Eventbrite, Fitbit, GoPro, Twilio, Box, Asana, Cloudera, Dropbox and SurveyMonkey — all called for urgent action from the UK government.

What this means for UK tech leaders

The UK start-up space saw a significant increase in tech investment last year, but would have taken a huge hit without government intervention. According to eWeek, in 2022 the UK ranked second for global startup funding with £12.7 billion (US$15.47 billion) in tech investment. The record put the UK ahead of China and India, signaling a new wave of digital acceleration that led the British government to promise more financial and regulatory support for the country’s tech sector.

With the timely intervention of the government, which facilitated the acquisition of SVB by HSBC, hope has been restored to technology investors in the country. Some tech leaders also reacted to the development. Dom Hallas, executive director of the Coalition for a Digital Economy, he tweeted that the government’s actions “have saved hundreds of the UK’s most innovative companies”.

“Fantastic news that HSBC will buy SVB UK. A good result which will help the UK tech sector to continue its growth. Great relief for many.” Daniel Korski, CEO and co-founder of PUBLIC, participated in a tweet.

Meanwhile, in the US, the financial industry and the technology sector are still struggling to fully recover from the collapse of SVB. A joint effort by the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation is addressing the parent company’s problems. Emergency measures have recently been announced to support banks and reassure depositors that their money is safe.

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