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Tech Startup Banking Giant Falls: First Citizens BancShares in Talks to Acquire Silicon Valley Bank

First Citizens BancShares is in advanced talks to acquire SVB.

27 March 2023

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Abhisek Dash

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  • . First Citizens BancShares in talks to acquire Silicon Valley Bank, a renowned bank for tech startups.

  •  SVB's collapse was due to bad decisions and timing, which led to a run on withdrawals by customers

  • With SVB's demise, startups will need to seek other financial solutions to meet their banking needs

 

In a surprising development, First Citizens BancShares is reportedly in advanced discussions to acquire Silicon Valley Bank, a renowned banking institution catering to the needs of tech startups. Earlier, there were reports suggesting that Valley National and First Citizens were interested in acquiring the bank.


This acquisition, if it materializes, will bring an end to one of the biggest banking failures in the US. Silicon Valley Bank's stock price plummeted after it announced that it would sell $2.25 billion worth of stock to bolster its balance sheet. This raised concerns in the venture world as the bank had relationships with over 50% of all venture-backed companies in the US and several VC firms, prompting a run on withdrawals by customers.



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Despite the bank's attempts to sell itself, regulators closed it down the next day. However, they later announced a plan to ensure depositors at the bank, which eased concerns in the startup community.


The reasons for SVB's collapse were a combination of bad decisions and bad timing. During the recent venture capital boom, the bank had excess cash as private companies raised substantial amounts of fresh capital at sky-high valuations, which were deposited into the bank. However, as the market slowed with rising interest rates, deposits by startups dipped, and the bank's decision to invest in long-term, higher-yield bonds proved disastrous. When customers began withdrawing cash, the bank had to sell its $21 billion bond portfolio at a $1.8 billion loss.


Silicon Valley Bank was established in 1983 with the objective of backing VC-backed companies, and it grew to become the dominant bank for tech startups and venture debt in the US. Additionally, SVB had a sizable private wealth management division that had significant synergies with its commercial banking operations


.With SVB's demise, startups will have to explore other financial solutions to meet their banking requirements.

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