IT services firm Quest adds Vector Capital to buyout group

Insight Venture Partners and Vector Capital will buy Quest Software for more than $2 million, overcoming a rival bid that may have come from Dell.

IT services firm Quest Software is a hot ticket.

The 25-year-old company announced last night that it would add Vector Capital to a buyout group that includes Insight Venture Partners, for a purchase price of more than $2 billion in cash.

Why the new blood? No one's saying publicly, but these things happen when there's competition. Bloomberg reported earlier this week that Dell was the suitor, but the company is mum on the subject. (Why Dell? Because the company seeks to remake itself as an enterprise IT provider.)

The final purchase price is $25.75 per share in cash, approximately a 33 percent premium to the company's stock price. (And probably too rich for Dell's blood.) The Wall Street Journal reports that chief executive Vinny Smith is expected to keep his job.

Quest specializes in database management, data protection, identity and access management, monitoring, user workspace management and Windows management. It's a natural fit for Insight, a private equity firm focused on software, infrastructure and IT services.

Meanwhile, Vector is no stranger to tech buyouts, having made investments in Corel, LANDesk, SafeNet and WinZip over the years.

But Quest has its challenges. Despite more than 100,000 customers, the company is increasingly under fire from partners like Oracle, which once provided hardware on which Quest could build software but now increasingly make their own tools, pushing Quest out of the picture.

We at ZDNet reported the threat way back in 2002:

The biggest threat to such a niche business might be the big application vendors themselves, but Asherie thinks they have bigger fish to fry, and will not be upgrading their own management products enough to make Quest and its rivals redundant: "Oracle's best and brightest developers are fighting DB2, which has resurged in the market."

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