Introduction:
The observability software provider New Relic, based in San Francisco, and the private equity firms TPG and Francisco Partners have agreed to part ways in a $6.5 billion all-cash transaction.
According to CNBC, TPG and Francisco Partners saved a deal that had previously collapsed after obtaining enough debt financing to reach New Relic’s desired valuation. Lew Cirne, the founder and executive chairman, and the activist hedge fund Jana Partners have approved, along with other significant shareholders.
The agreement stipulates that New Relic will have a 45-day “go-shop” window during which it can consider offers from additional qualified bidders. However, owners of New Relic will receive $87 per share, a 7.5% premium over the stock’s closing price on Friday, should it close as proposed — most likely in late 2023 or early 2024, subject to standard closing conditions.
Cirne founded New Relic in 2008, which offers software to track online and mobile applications in real-time and supports custom plugins to gather arbitrary telemetry and performance data. To create connectors and manage observability data flows, the company collaborates with businesses like IBM, AWS, Azure, and Rackspace and backend service providers for mobile apps like StackMob and Parse.
New Relic went public in 2014 after receiving nearly $200 million in venture money from backers like Insight Venture Partners, T. Rowe Price, Benchmark Money, and BlackRock. In the following years, the business used some earnings to buy many companies, including the developer collaboration tool CodeStream and the monitoring provider Pixie Labs for cloud-native workloads.
New Relic Agrees to Go Private all-Cash Deal:
New Relic Agrees to Go Private all-Cash Deal (Image Source: finance.yahoo.com)
To transition from a software subscription sales model to a consumption-based strategy in 2021, New Relic underwent a restructuring plan that entailed firing close to 160 people. However, the business continued to progress in its most recent fiscal quarter, increasing budgetary year Q1 2024 revenue by 12% year over year to $242.6 million.
The decision by New Relic to go private comes as the observability industry is heating up due to an increase in the amount of money that businesses are willing to spend on data-driven decision-making and reducing the complexity of their data infrastructure. According to one estimate, observability startups have raised close to $2 billion in finance during the last two years.
Honeycomb and Accel Data, two of the most prosperous observability businesses, raised $50 million in the past year for their tools that let developers check apps and data for performance issues. Additionally, Cribl raised $150 million in May last year; Monte Carlo raised $135 million the same day, and Coralogix raised $142 million a week after Cribl and Monte Carlo.
By 2028, the market for observability tools and platforms is expected to reach a value of $4.1 billion, nearly doubling its current $2.4 billion deal, according to Markets and Markets.
