On March 13, 2023, HSBC has agreed to buy a subsidiary of Silicon Valley Bank in the UK for £1. The deal is being acquired by the UK government and the Bank of England after Silicon Valley Bank. Bank branch in the United States with liquidity problems
“This transaction makes a lot of sense for our business in the UK,” HSBC Chief Executive Officer Noel Quinn said in a statement on Monday.
Why does HSBC buy SVB make sense?
In the words of HSBC’s Chief Executive Officer, “There is a very good reason for our business in the UK.” This sentence can be interpreted in two ways:
- Interpret that there may be many tech start ups that HBSC has invested in as well. Involved in Silicon Valley Bank as well, may wish that the Silicon Valley Bank name has not disappeared from the financial world.
- With the reputation of the City of London as the world’s largest pool of money. Buying a bank that supports tech start-ups located in london at this price is the best investment.
“The UK Government says customer deposits will be protected and Silicon Valley Bank UK customers will have access to their deposits and banking services from March 13, 2023. Subject to the terms of the agreement, HSBC branches in The UK will use its in-house capital to acquire Silicon Valley Bank UK Limited, which is expected to be completed immediately, but as of now, the deal does not include the assets and liabilities of parent Silicon Valley Bank.
The term “parent company” indicates that future HSBC may gain access to assets and help the debt of the UK branch after HSBC buys SVB, mainly because Silicon Valley Bank UK only has a problem with liquidity insufficient, which is the debt of Tech Company Asset. As a result, in the future, HBSC may be able to profit from the revived Silicon Valley Bank, and the tech companies inside will be able to grow to pay off debt.
Why buy it for just £1?
In order to buy a company, we only have to buy it by bringing money to exchange for assets in the company. But in the case of HSBC buying SVB, what Silicon Valley Bank UK has is debt of tech start ups (Liability) and Client money Deposited money (can’t sell client money) with no remaining assets at 0 or negative, so access can be bought for £1 because 1 is greater than 0 (like HBSC buying Silicon Valley debt). UK lightly)
Written by Merkle Investment team
source: https://www.washingtonpost.com/business/2023/03/13/svb-uk-hsbc-acquisition/