Francisco Partners, TPG end talks to buy New Relic -sources

New Relic

26/05/2023 18:49

(Adds share price reaction, background on merger talks in
paragraphs 2-3, 5, 7-8)
    By Anirban Sen and Milana Vinn
       NEW YORK, May 26 (Reuters) - 
    Private equity firms Francisco Partners and TPG Inc  TPG.O 
have ended talks to acquire New Relic Inc  NEWR.N  after they
failed to secure enough debt financing and could not meet the
business software company's valuation expectations, people
familiar with the matter said.
  
    The demise of the deal negotiations underscores the
challenges facing private equity firms seeking to put together
leveraged buyouts.
        High interest rates have made debt more expensive, while
concerns about an economic slowdown have made lenders more
risk-averse, especially when it comes to financing technology
companies such as New Relic that have strong revenue but limited
cash flow.
  
    New Relic has been negotiating with potential acquirers
since last year, Reuters has reported, and it's possible that
deal talks resume some time in the future, the sources added.
    The gap in the deal price expectations between the parties
could not be learned. Shares of New Relic dropped 5% to $73.65
in Friday afternoon trading, giving the company a market value
of about $5 billion.
    The sources requested anonymity because the matter is
confidential. New Relic and Francisco Partners did not
immediately respond to requests for comment, while TPG declined
to comment.
        San Francisco-based New Relic develops cloud-based
software to help websites and application owners track the
performance of their services. Founded in 2008, the company
listed in 2014.
  
        New Relic has previously been targeted by several
activist hedge funds including Jana Partners, Engaged Capital
and Eminence Capital. Last year, Jana won representation on New
Relic's board.
  

 (Reporting by Anirban Sen and Milana Vinn in New York; Editing
by Greg Roumeliotis and Leslie Adler)
 ((Greg.Roumeliotis@thomsonreuters.com; +1 646 223 6022; Reuters
Messaging: greg.roumeliotis.thomsonreuters.com@reuters.net))