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Francisco Partners & TPG to take New Relic private in $6 billion all-cash deal

Francisco Partners & TPG to take New Relic private in $6 billion all-cash deal

In a significant move in the world of technology investments, a consortium led by Francisco Partners, a renowned technology-focused private equity firm, and TPG, a well-established alternative asset manager, has struck a deal to acquire New Relic, a prominent software provider, and take it private. The all-cash offer, valued at a staggering $6.5 billion, was announced by New Relic on Monday and marks an exciting chapter in the company’s journey.

New Relic, which builds innovative software to help websites and applications track their performance, has garnered substantial attention in the market. Following the announcement of the acquisition offer, New Relic’s shares soared by 13% during morning trading, reaching nearly $84. The offer, set at $87 per share, represents an impressive 26% premium to New Relic’s 30-day volume-weighted average closing price, reflecting the consortium’s confidence in the company’s potential.

The acquisition comes almost nine years after New Relic’s initial public offering on the New York Stock Exchange in 2014, as the company now prepares to return to private ownership under the guidance of Francisco Partners and TPG. New Relic’s founder and Executive Chairman, Lew Cirne, expressed his enthusiasm for the partnership, stating that he is pleased to collaborate with Francisco Partners and TPG, recognizing their commitment to building upon New Relic’s strong foundation and unlocking its full potential.

The road to this momentous agreement has not been without its challenges. In May, there were reports that the deal talks between Francisco Partners, TPG, and New Relic had stalled due to difficulties securing enough debt financing to meet the desired valuation. However, the consortium was determined to make the deal happen and persisted in obtaining the necessary financing, successfully aligning with New Relic’s valuation requirements.

Major shareholders, including New Relic’s founder Lew Cirne and activist hedge fund Jana Partners, have given their approval for the acquisition. This vote of confidence from key stakeholders signals widespread support for the consortium’s vision and strategy for New Relic’s future.

As part of the agreement, New Relic will have a 45-day “go-shop” period, during which it can actively consider alternative offers from other qualified bidders. This provision ensures that the company has the opportunity to explore all viable options before finalizing the deal with Francisco Partners and TPG.

TPG, the consortium’s leading partner, is a highly reputable alternative asset manager with an extensive portfolio of global investments. Some of its notable investments include companies like Airbnb, Box, and Zscaler, making it a prominent player in the technology and hospitality sectors.

Francisco Partners, on the other hand, is widely recognized for its focus on technology-related private equity investments. Past successful ventures include Barracuda Networks, On Semiconductor, and K2. The firm has previously taken cloud and IT companies private, showcasing its expertise in navigating such transactions. Notable deals in its portfolio include a $1.7 billion acquisition of Sumo Logic and a 2018 investment in payment technology company Verifone.

With the deal expected to close by early 2024, the technology industry eagerly awaits the future developments of New Relic under the guidance of Francisco Partners and TPG. This acquisition represents a momentous shift for the software provider, signifying a renewed focus on growth and innovation away from the public scrutiny that comes with being a publicly-traded company.

As the consortium-led acquisition sets a new precedent in the technology investment landscape, it also underscores the continued interest of private equity firms in tech companies with potential for substantial growth and value creation. New Relic’s journey to private ownership is sure to be closely watched by industry experts and investors alike, as it could pave the way for similar transformations in the tech sector in the coming years.


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