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TPG, Francisco Partners add to LBO momentum with $6.5B software deal

Pitchbook
·2 min read

PE firms TPG and Francisco Partners are set to take software observability company New Relic off the public market in one of this year's largest take-private deals.

The two buyout shops agreed to acquire the San Francisco-based company for $87 per share in cash, a roughly 26% premium to New Relic's 30-day volume-weighted average closing price ended Friday.

The deal is one of a number of take-privates that have followed on the heels of dampened PE deal flow. At $6.5 billion, the New Relic all-cash deal is among some of the largest PE-led take-privates of 2023 and well above H1 2023's median deal size of $482.9 million, according to PitchBook data.

New Relic reportedly received a $2 billion-plus private credit loan to support the buyout, according to leveraged finance publication 9fin. PitchBook LCD also reported New Relic received debt financing to back the take-private, with Blue Owl as the lead and agent on the financing.

Some of the largest PE-led take-privates announced this year include the more than $15 billion sale of Toshiba to a group led by Japan Industrial Partners; the $12.4 billion purchase of Qualtrics by Silver Lake and the Canada Pension Plan Investment Board; and the $8.1 billion sale of Univar to Apollo Global Management.

Overall, take-privates have been trending smaller. H1 2023's median deal size is a steep drop from 2022's $1.7 billion, a product of an industry-wide shift to the middle market amid elevated financing costs. In fact, more than half of this year's US buyouts did not hit the $1 billion mark, according to PitchBook's Q2 2023 US PE Breakdown.

New Relic, which helps companies monitor and debug their technology stacks, went public in 2014 at $23 per share.

Digital infrastructure management is a thematic focus area for TPG, according to a statement from Art Heidrich, a tech investor at the firm. Information technology accounts for about 25% of the buyout shop's portfolio, according to PitchBook data.

TPG will invest in New Relic through TPG Capital, the firm's US and European late-stage private equity platform. The transaction is expected to close late this year or early next year.

New Relic was the target of activist investor Jana Partners last year and, as a result of Jana's campaign, agreed to board changes in June 2022. Jana held about 4.57% of New Relic as of March 30.

TPG, Francisco Partners and New Relic did not respond to PitchBook's request for comment by publication time.

Related read: The return of the LBO machine


Featured image by Maskot/Getty Images

This article originally appeared on PitchBook News