Private equity firms Francisco Partners and TPG today agreed to purchase cloud-observability platform New Relic Inc. and take the company private in a deal worth about $6.5 billion.

The firms have offered New Relic shareholders $87 per share in cash, representing a 26% premium on the company’s 30-day volume-weighted average closing price through last Friday, the company said. Shares in the company rose 14% in pre-market trading, to over $84.

New Relic builds software that helps companies track monitor, debug and improve their software development lifecycle by detecting problems while applications and websites are running. With its observability platform, users can boost efficiency and stay ahead of issues before they become major problems.

“This transaction is the result of a comprehensive process that included engagement with both financial and strategic parties, led by a transaction committee that included representatives of two of our largest public shareholders,” said Hope Cochran, lead independent director of the New Relic board.

This news comes after a report that the original deal talks had faltered in late May after New Relic had sought a buyer since the middle of last year. At the time Francisco Partners and TPG had failed to secure enough debt financing to leverage the financing. Since then, major shareholders, including New Relic founder Lew Cirne, hedge fund Jana Partners LLC and Engaged Capital, have signed off on the deal.

New Relic was founded in 2008 and went public on the New York Stock exchange in 2014. The transaction is expected to close by early 2024 and will return the company to private ownership.

“As technology continues to become more feature rich and AI-enabled, the need for visibility is only increasing,” said Nehal Raj, co-managing partner at TPG. “New Relic is a pioneer in the observability market, providing developers and engineers with a unified platform to proactively monitor and manage mission critical applications.”

This isn’t the first time that TPG and Francisco partners have collaborated together on deals. Recently the two private equity firms jointly acquired the government business cybersecurity firm Forcepoint LLC in a deal worth $2.25 billion. The two companies also worked together in 2021 to acquire the integration platform-as-a-service company Boomi from Dell Technologies Inc. for $4 billion in 2021.

Photo: New Relic