IT infrastructure-monitoring company New Relic is set to be acquired for $6.5 billion by Francisco Partners and TPG. Learn about the acquisition process, stakeholders, and its impact on the market.
IT infrastructure-monitoring software company, New Relic (NEWR), has announced that it will be acquired by private-equity firms Francisco Partners and TPG for $87 per share in cash, totaling around $6.5 billion.
After more than a year of being in play, New Relic began considering a potential sale in July 2022, with talks of hiring financial advisors. However, negotiations with Francisco and TPG fell through due to insufficient debt financing. The latest development indicates a shift in the situation. Lead independent director, Hope Cochran, stated that the decision to accept the deal was reached after a thorough process involving discussions with both financial and strategic potential buyers. Founder Lew Cirne, whose name forms an anagram of "New Relic," will retain his 40% stake in the company as part of the new ownership group.
The deal is expected to be finalized by the end of this year or early 2024, subject to fulfilling various regulatory obligations. Notably, New Relic emphasized that the agreement does not hinge on any financing conditions, addressing concerns regarding the buyers' previous difficulties in securing financial support.
As part of the agreement, New Relic has a 45-day "go-shop" period during which it can consider alternative proposals if any arise. However, according to Needham analyst Mike Cikos, the $87 deal price appears fair, making a competing bid from another party unlikely.
New Relic specializes in observability software, which monitors the performance and activity of corporate IT networks. The announcement of the acquisition deal has had a positive impact on competitors in this sector. Shares of rivals such as Datadog (DDOG), Dynatrace (DT), Splunk (SPLK), and Elastic (ESTC) experienced boosts of 3.6%, 2%, 4.4%, and 3% respectively.
New Relic's shares saw a significant increase of 13% to $83.89.
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