New Relic, the San Francisco-based observability software company, has reached an agreement with private equity firms TPG and Francisco Partners to go private in a $6.5 billion all-cash deal.
As reported by CNBC, TPG and Francisco Partners were able to salvage a deal that initially fell through months ago after securing enough debt financing to meet New Relic’s desired valuation. Major shareholders, including founder and executive chairman Lew Cirne and activist hedge fund Jana Partners, have signed off.
Under the terms of the agreement, New Relic will have a 45-day “go-shop” period during which it can entertain offers from other qualified bidders. But should it close as proposed — likely in late 2023 or early 2024, subject to customary closing conditions — New Relic shareholders will receive $87 per share, a 7.5% premium over the stock’s closing price on Friday.
“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,” Cirne said in a press release.
New Relic, which Cirne founded in 2008, provides software to monitor web and mobile apps in real time, with support for custom-built plugins to collect arbitrary telemetry and performance data. The company partners with companies like IBM, AWS, Azure and Rackspace as well as mobile app back-end service providers such as StackMob and Parse to build connectors and handle observability data flows.
In 2014, after raising nearly $200 million in venture capital from investors including Insight Venture Partners, T. Rowe Price, Benchmark Capital and BlackRock, New Relic went public. In the years following, the company used part of the proceeds to make several acquisitions, snatching up Pixie Labs, a service for monitoring cloud-native workloads, and CodeStream, a developer collaboration tool.
2021 saw New Relic undergo a restructuring plan to move away from a software subscription sales model to a consumption-based model, which included laying off nearly 160 employees. But in its most recent fiscal quarter, the company showed steady gains, growing fiscal year Q1 2024 revenue 12% year-over-year to $242.6 million.
Bill Staples, the CEO of New Relic, said in a canned statement: “New Relic has made significant progress on its consumption business transition and, together with Francisco Partners and TPG, we will have the resources and flexibility to not only complete the final chapter of this transition, but also accelerate our strategy and provide customers with a standardized data-driven practice that any company can benefit from.”
New Relic’s move private comes as the observability market heats up, spurred by a growing desire by enterprises to invest in data-driven decision-making and mitigating the complexity of their data infrastructure. By one estimate, observability companies raised nearly $2 billion in capital over the past two years.
Among some of the more successful observability startups are Honeycomb and Acceldata, which raised $50 million each within the last year for their tools that enable devs to monitor apps and data for performance issues. There’s also Cribl, which raised $150 million last May; Monte Carlo, which nabbed $135 million the same day as Cribl; and Coralogix, which snagged $142 million just a week later than Cribl and Monte Carlo.
Markets and Markets projects that the market for observability tools and platforms will be worth $4.1 billion by 2028, close to doubling from $2.4 billion this year.