Dell (News - Alert) Inc. is willing to pay $2.32 billion in order to acquire Quest Software Inc., it has been revealed. Dell’s identity as one of the bidders willing to purchase Quest was revealed only recently. Previously, Dell had offered a maximum price of $26 per share of Quest, but the latest development means that the company is willing to purchase the same for $27.50.

Dell’s main competitor for Quest, Insight Venture Partners had earlier placed a $2.17 billion offer, which translates to $25.75 per share. Obviously, Dell’s offer is already higher than Insight Venture’s but this does not in any case mean that Dell has an upper hand. By Monday June 25, Quest’s shares were trading at $27.60, thus making it likelier that a counter-offer will be issued against Dell’s $27.50 per-share offer.  It is however predicted that the flexibility of Quest’s buy out is limited within the $27.50 to $28 scope per share. It is also unlikely that Insight Venture Partners will amend their bid beyond the $28 projected limit since such a move would require them to boost their equity commitments and make alterations to the structure of their debt financing.

The buyout of Quest by Dell is part of the latter’s strategy that focuses in diversifying its operations from the production and sale of personal computers. By acquiring a software developing company, Dell will have made a step towards what its executives have identified as a potential area for growth in days to come.

The offer by Dell is however not a done deal since decision makers at Quest had agreed to sell the software development company to Insight Venture for $25.75/share. With the toppling of this arrangement by Dell’s ‘better’ offer, Insight Ventures has a three days limit during which it can either match its bid to Dell’s offer, or adjust the same to a higher offer.

It is estimated that 34 percent of Quest’s shares are owned by its chairman and CEO, Vincent Smith, and it is argued that such huge shareholding by a single person may complicate the acquisition by interested parties.  

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