Observability software provider New Relic has reached an agreement led by a consortium led by Francisco Partners and private equity group TPG to go private in a $6.5 billion deal. The news comes at a time of intense competition in the application performance monitoring sector, with rival software companies like Datadog and Dynatrace vying for dominance.
The all-cash deal, which is expected to close by early 2024, will return the San Francisco-based New Relic to private ownership just about nine years after the company first made its first debut on the New York Stock Exchange in 2014. New Relic develops software that aids in monitoring and tracking the performance of websites and applications.
“We are pleased to partner with Francisco Partners and TPG, who are committed to continuing to build upon New Relic’s strong foundation and achieve its full potential,” New Relic founder and Executive Chairman Lew Cirne said in a release.
As reported by CNBC, TPG and Francisco Partners successfully resurrected a deal that had previously fallen through months ago by securing sufficient debt financing to meet New Relic’s desired valuation. Key shareholders, including founder and executive chairman Lew Cirne and activist hedge fund Jana Partners, have given their approval for the deal.
According to the terms of the agreement, New Relic will have a 45-day “go-shop” period to consider offers from other qualified bidders. If the deal proceeds as planned, which is expected in late 2023 or early 2024, subject to regular closing conditions, New Relic shareholders will receive $87 per share, representing a 7.5% premium over the stock’s closing price on Friday.
Founded by Lew Cirne in 2008, New Relic offers real-time monitoring software for web and mobile apps, with the ability to support custom-built plugins to collect performance data. The company collaborates with industry giants like IBM, AWS, Azure, and Rackspace, as well as mobile app back-end service providers like StackMob and Parse to facilitate data flow and observability.
Kingsley Crane, an analyst at Canaccord Genuity, predicts that if the deal goes through, competitors will likely target New Relic’s customer base for customer acquisition opportunities.
“We think competitors will clearly target New Relic’s customer base as a source of customer acquisition if the deal were to go through,” Kingsley Crane, an analyst at Canaccord Genuity, said.