New Relic, a prominent player in the application performance monitoring space, has agreed to be acquired by private equity firms TPG and Francisco Partners in a massive all-cash deal worth US$6.5 billion ($9.7 billion). The move comes as the competition in the industry intensifies, with rival companies like Datadog and Dynatrace vying for market share.
The deal has caused New Relic’s shares to rise by approximately 13 percent, reaching US$83.85. The private equity firms offered US$87 per share to New Relic shareholders, representing a 15 percent premium over the stock’s closing price on May 16, just before news of the potential deal surfaced.
New Relic’s cloud-based software is highly sought after as it enables websites and mobile apps to monitor servers, databases, and user interactions, enhancing operational efficiency for businesses striving to optimize their resources.
While New Relic has reported respectable annual revenue growth of around 18 percent, its competitors, Dynatrace and Datadog, have witnessed even higher surges, with Dynatrace at 25 percent and Datadog soaring at 63 percent in 2022 sales.
Industry analysts anticipate that if the deal goes through, New Relic’s customer base could be targeted by competitors as a means of customer acquisition. However, the company has a 45-day window to consider other acquisition proposals before finalizing the agreement.
New Relic’s financial adviser for the transaction is Qatalyst Partners, while Morgan Stanley is leading the financial advisory for Francisco Partners and TPG.
