Episode 229: Banking Failures: What Dealmakers Need to Know

The recent collapse of Silicon Valley Bank (SVB) and Signature Bank (SB) in March 2023 has sent shockwaves through the financial industry, leading many to speculate on the potential consequences for the deal market. Some experts predict a significant slowdown in deal flow as a direct result of these banking failures, due to increased caution from both investors and startups.   It is important to have an understanding of how these failures impact deals, and recognize how deals can both cause and solve problems during times of crisis.     THE TWO SIDES OF WHEN A BANK FAILS When a bank fails, it can be a bad deal for investors, but it is the nature of risk capital. Many opportunities, however, can be found during times of crisis, as demonstrated by JP Morgan Chase's acquisition of Washington Mutual during the 2008 financial crisis.   With these well-established banks no longer serving as reliable partners for financing and facilitating transactions, there may be a hesitation among other banks and financial institutions to fill the void, further contributing to the anticipated slowdown.   On the other hand, there are those who view these bank failures as an opportunity to seize lucrative deals in a challenging market environment. For financial institutions and investors with a higher risk tolerance, the absence of SVB and SB could provide a chance to step in and capitalize on the uncertainty. Moreover, this may lead to an increase in M&A activity, as distressed companies seek financial stability through partnerships or acquisitions.     THE IMPACT OF BANK FAILURE CRISES As with any crisis, it’s important for a dealmaker to approach the recent bank failures with a sense of reserved optimism. Because of the dependency on banks, many sectors in business can be – and are – impacted by bank failures.   One area that may be affected is bank deals, which have already slowed down due to various economic concerns. The impact, however, may not be limited to the banking sector alone, as uncertainty and risk may cause deals to slow down across various industries.   The most significant impact may be on mindset and how dealmakers approach this situation. While some may react with fear and negativity, others may seek opportunities and take calculated risks. Regardless of where one falls on the spectrum, it is important to keep one's eyes open for deal opportunities and avoid burying one's head in the sand.  • • Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.   If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!