New Relic said it has agreed to be taken private by TPG and Francisco Partners in a US$6.5 billion all-cash deal.
TPG and Francisco offered New Relic shareholders US$87 per share.
That represented a premium of 15 per cent to the stock's closing price on May 16, a day before media reports of a potential deal.
New Relic's cloud-based software allows websites and mobile apps to monitor servers and databases, as well as to track user interactions, helping boost efficiency at a time when firms are looking to stretch every dollar.
The company faces stiff competition in the application performance monitoring space from rival software companies Datadog and Dynatrace.
New Relic reported annual revenue growth of about 18 per cent compared to Dynatrace's 25 per cent jump.
Datadog posted a 63 per cent surge in 2022 sales.
"We think competitors will clearly target New Relic's customer base as a source of customer acquisition if the deal were to go through," Kingsley Crane, an analyst at Canaccord Genuity, said.
New Relic on Monday reported first-quarter revenue of US$242.6 million, compared with analysts' estimates of US$239.2 million, according to Refinitiv IBES data.
The company has been targeted by several activist hedge funds including Jana Partners, Engaged Capital and Eminence Capital.
Last year, Jana won representation on the company's board.
New Relic, which was founded in 2008 and went public six years later, has a 45-day window to seek other acquisition proposals.
Qatalyst Partners is the company's financial adviser, while Morgan Stanley is the lead financial adviser for Francisco Partners and TPG.
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