Here’s Why Dell Went Overboard And Spent $2.4 Billion To Nab Quest Software

Michael Dell

Dell and Quest Software officially revealed what the world already knew: that Dell was in a bidding war against a band of private equity firms to buy Quest Software.

The two companies announced that Dell would buy Quest for $2.4 billion — slightly more than Dell’s own last bid of $2.32 billion

Dell will pay $28 a share for Quest — or $5 more per share than what Quest was willing to take before the bidding war started in May.

Quest’s chairman and CEO Vinny Smith didn’t want to sell to Dell, reports the Wall Street Journal. Smith wanted to sell to private equity firms Insight Venture Partners and Vector Capital. This set off a tug-of-war for the company. Smith wanted to sell to the private equity firms so badly, that in June, when they were able raise enough funds to offer $2.17 billion and top Dell’s latest bid, Quest issued a press release announcing the deal with them.

But Dell was privately sweetening its offer until the board couldn’t resist. Indeed, Dell even went so far as to top its own highest bid, moving up from $27.50 a share to $28 a share over the last couple of days, the WSJ’s David Benoit reports.

Dell has been on an acquisition binge in an effort to transform itself from a PC company to an enterprise company that can beat the likes of IBM and HP.

It wanted Quest because it has about 100,000 enterprise customers selling software that automates a lot of tasks to make sure that big enterprise software — like Oracle or IBM databases — never go down. It also offers software that helps companies move to Windows 7. On top of that, it has a a whole bunch of resellers. Dell wants them to sell its hardware and network gear.

Quest is a 25-year-old company that reported $857 million in sales and $44 million net profit last year.

Dell doesn’t feel the need to disclose how much it spends on acquisitions, even big ones, but it looks like this deal is the second-largest in Dell history. The largest would have been in 2009, when Dell acquired Perot Systems, for a reported $3.9 billion.

Dell has bought six companies in 2012, and eight last year.

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