Most of the concerns of SVB’s collapse have focused on the markets and the broader economy. But how will the firm’s demise impact the middle market?
While much attention has been paid to Silicon Valley Bank‘s focus on venture capital, the company also catered to private equity by offering financing and private banking services. Some of its PE clients included Bain Capital, Bregal Sagemount, Francisco Partners, L Catterton and TA Associates.
“Many PE firms do their banking with SVB,” says Jeff Magny, founder of Lincoln Road Global Management. “Which means in some cases payroll is processed through the bank and bridge facilities are provided to PE firms among other services.”
Analysts say there will be near-term pain felt on deals as firms wait and see how things unfold and look to recoup their money. This will likely delay some deal closings as PE firms look for other lenders, they say. “As people think about asset and liability management, maybe that ultimately finds its way in directly into into the middle-market lending arena,” says Brad Armstrong, a partner at Lovell Minnick Partners.
“As people think about deploying capital, think about managing portfolios and risk appetite, you’re likely to see some some risk aversion that just seeps into into people’s mindset as a result of this,” adds Armstrong.
Armstrong says the greater impact on private equity depends on how potential buyers feel about SVB’s assets. Some heavyweight PE firms are reportedly interested in SVB’s loan book.
“I think there’s an important factor on speed of moving towards that next step,” Armstrong says. “If indeed that’s the next step for the institution, I think a lot will hinge on what happens there. If it doesn’t have a buyer, I think it becomes more disruptive to the industry.”
“I’m sure there’ll be some short-term friction, but there are a number of other providers in the space,” Armstrong adds.
How do you think SVB’s situation will impact the middle market? Let me know at: [email protected].
–Demitri Diakantonis
