Quest Software

Corporate IT and database applicant, Quest Software has agreed to be taken private by private equity firm, Insight Venture Partners.  The offer would value $2 billion and would give shareholders $23 per share.  That is a 19% premium to the company’s close on Thursday.

Quest will still have its standard operating procedure once it is private.  Vinny Smith, the current CEO and other management leaders will remain at the company, conducting ordinary business operations.

The company’s board of directors has voted and approved the deal.  Now that the deal has been agreed to on both sides of the table, a team of directors will oversee a 60 day “go shop” period which means they will see if there are any other offers from competitors that could be better for the company.  However, Insight has stated in the terms that there will be a $4.2 million breakup fee if Quest does find a better deal.  If Quest decides to break the deal off after the 60 day window, the fee rises to $6.3 million.

Insight has already committed $210 million to taking the company private and as well as some already approved debt financing from JP Morgan, RBC Capital Markets and Barclays Capital.  It should be noted that RBC Capital Markets and Barclays Capital were the acting financial advisers for the deal, while Morgan Stanley was the adviser to the special committee.

Quest Software’s stock has had a bumpy last year with shares down 30%.  However, shares spiked 20% on Friday once the news broke, now trading around $23.50.

As far as I am concerned, if the board of directors unanimously votes and agrees on something then it might be worth going through with.  Insight has given Quest a good deal from what I have read about it.  Shareholders are being well taken care of which means there should be no resistance from shareholders against the deal.  Ultimately it sounds like this will benefit all sides.

Quest CEO, Vinny Smith said that going private would put the company in a more innovative stance which will be easier for management to implement without shareholders breathing down the board’s neck.  In addition the CEO said that there would be a number of “exciting career opportunities” for Quest employees. This should also halt any potential discrepancies with employees.

Venture capital continues to make deals and increase its presence in the marketplace to help ailing numbers revive.  Deals like this Quest-Insight deal will be more and more common as ailing business and private equity look to team up and improve growth and profitability.