By Anirban Sen and Milana Vinn
NEW YORK (Reuters) – Private equity firms Francisco Partners and TPG Inc have ended talks to acquire New Relic Inc 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)