Updated July 2, 2012, 11:38 a.m. ET.

Dell to Buy Quest Software for $2.36 Billion

By VICTORIA STILWELL And DREW FITZGERALD
Dell Inc. announced Monday its agreement to buy business-software maker Quest Software Inc. for $2.36 billion, ending a bidding war with a private-equity group that included the company's chief executive.

Dell offered $28 a share for Quest, well above an initial bid of $23 a share from Insight Venture Partners, a venture-capital firm that has a longstanding relationship with Quest and Vinny Smith, its chairman and chief executive. Insight had partnered with private-equity firm Vector Capital to raise its bid to $25.75 a share, valuing the company at $2.17 billion.

Quest last week said Dell's offer was superior without identifying the bidder. The buyout group considered Dell's latest bid too high, according to a person familiar with the situation.

The deal offers a 44% premium over Quest's share price in early March, before the company received its initial offer. It values Quest at about 16.9 times projected earnings.

Quest is the latest in a string of deals in a string of deals for Dell as the Round Rock, Texas, company looks to expand past its core business of selling PCs. In particular Dell has focused on buying software makers, like Quest, with higher-margin businesses than computers.

Dell earlier this year formed a unit dedicated to selling software and hired John Swainson, the former head of CA Inc., to run it. Dell has already announced several acquisitions this year, including security firm Sonicwall Inc. and Wyse Technology Inc., which specializes in Web-based software.

Analysis firm Stifel Nicolaus said Dell could focus on integrating its existing software business with Quest's data-security and virtualized desktop products that could work with Wyse.

Quest, of Aliso Viejo, Calif., has faced mounting competition in its traditional specialty—software for managing databases—as vendors such as Oracle Corp. have introduced their own management tools. Quest has responded by trying to diversify its business by acquiring smaller rivals that help technicians manage servers more easily and protect data.

Dell last week offered $27.50 a share, or about $2.32 billion for Quest. Insight had the opportunity to match or beat the increased offer but struggled to put together financing despite last-minute efforts by Mr. Smith, according to people familiar with the matter.

The fight over Quest echoes a similar battle Dell waged for high-end data-storage maker 3Par Inc. in 2010. Dell eventually bowed out after Hewlett-Packard Co. bid $1.6 billion for the company, which makes rapidly accessible storage drives that allow corporations to run more efficient databases.

Dell to Buy Quest Software for $2.36 Billion - WSJ.com