New Relic Acquisition: Key Details, Impact, and What Comes Next

Francisco Partners and TPG have successfully acquired New Relic in a deal valued at $6.5 billion. This acquisition marks a significant shift in the software and technology sectors, positioning New Relic as a private entity with enhanced flexibility to invest in its observability platform. The move is expected to bolster New Relic's capabilities in meeting the evolving data needs of its global clientele.

What Is New Relic?

Founded in 2008, New Relic offers an intelligent observability platform designed to monitor, debug, and improve software performance. Its core products include Application Performance Monitoring (APM), security tools, FinOps, digital experience monitoring, and infrastructure monitoring. Unique in the market, New Relic provides a comprehensive suite of tools within a single platform, flexible usage-based pricing, and extensive integration capabilities, making it a versatile solution for diverse technological needs.

Who Acquired New Relic?

Francisco Partners is a leading technology investment firm known for its deep sector focus and flexible capital solutions. The firm specializes in private equity and credit funds, partnering with technology companies to drive growth and innovation. Recognized as one of the largest and most active technology-focused investment firms globally, Francisco Partners has earned accolades such as the top global large buyout performer by HEC Paris-Dow Jones and a spot on Inc.'s 2024 list of founder-friendly investors.

When Was New Relic Acquired?

Francisco Partners and TPG completed the acquisition of New Relic on November 8, 2023. This acquisition occurred during a period of significant growth and consolidation in the technology and observability sectors. The move to take New Relic private aligns with broader industry trends, allowing the company to have enhanced flexibility and resources to invest in its observability platform. This timing is crucial as it enables New Relic to better meet the increasing data and efficiency needs of its customers.

Why Was New Relic Acquired?

• Market Expansion: The acquisition by Francisco Partners and TPG positions New Relic as a private company with enhanced flexibility and resources to continue investing in its observability platform. This strategic move is likely aimed at expanding New Relic's market presence and capabilities. TPG’s Art Heidrich emphasized the focus on growing customer relationships and enhancing product capabilities, which aligns with their thematic focus on digital infrastructure management.
• Technology Integration: Francisco Partners and TPG bring deep sectoral knowledge and operational expertise in technology, which will benefit from New Relic's advanced observability platform. New Relic's unified data platform integrates various telemetry data with full-stack analysis tools, enhancing software development and operational efficiency. Nehal Raj from TPG highlighted the increasing need for visibility in technology, underscoring New Relic's role as a pioneer in the observability market.
• Competitive Advantage: The acquisition allows New Relic to leverage the financial and operational support of Francisco Partners and TPG, potentially giving it a competitive edge in the observability market. New Relic's unique usage-based consumption pricing model and comprehensive platform help improve planning cycle times, change failure rates, release frequency, and mean time to resolution. This positions New Relic as a leader in the market, providing significant value to its customers, including major brands like adidas Runtastic and American Red Cross.

Acquisition Terms

• Acquisition Price: $87.00 per share, representing an equity valuation of approximately $6.5 billion.
• Payment Method: All-cash acquisition.
• Key Conditions or Agreements:
  • The acquisition agreement was disclosed on July 31, 2023.
  • The agreement was approved by New Relic stockholders at a special meeting held on November 1, 2023.
  • New Relic’s common stock has ceased trading and is no longer listed on the New York Stock Exchange.
  • New Relic shareholders Lew Cirne, JANA Partners LLC, and HMI Capital Management L.P., representing approximately 20% of New Relic’s outstanding shares, signed voting agreements in support of the transaction.
  • Lew Cirne agreed to roll over approximately 40% of his beneficial shareholdings.
  • The transaction is subject to customary closing conditions and regulatory approvals, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
  • New Relic negotiated a 45-day "go-shop" period to solicit alternative acquisition proposals from third parties.
  • If a superior proposal is found, New Relic would have to pay a $98 million break-up fee to Francisco Partners and TPG.

Impact on New Relic

The acquisition of New Relic by Francisco Partners and TPG has led to significant changes in the company's operations and management. Transitioning to a private entity, New Relic now enjoys enhanced flexibility and resources to invest in its observability platform. Founder and Executive Chairman Lew Cirne has rolled over 40% of his stake, indicating a continued commitment to the company's future. This shift is expected to streamline decision-making processes and accelerate strategic initiatives, positioning New Relic to better meet the evolving needs of its customers.

While there have been no immediate changes to New Relic's product offerings, the acquisition is anticipated to bolster its capabilities in observability and data-driven practices. Employee reactions have been positive, with CEO Bill Staples expressing pride in the team's achievements. Customer reactions have been cautiously optimistic, with the acquisition seen as a move to enhance service quality and innovation. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.