The (bargain) quest for Quest

Contact: Brenon Daly

Nobody wants you, then everyone wants you. In the year leading up to the proposed management buyout of Quest Software in early March, shares of the management software vendor had shed one-quarter of their value. (At one point in its slide last August, the stock dipped to $15 – its lowest point in two years.)

The ongoing bidding war, of course, has changed all that. Since sinking to its low-water mark last summer, Quest’s valuation has risen a cool $1bn, with an unidentified suitor (widely assumed to be Dell) bidding about $2.4bn for the old-line software company on Monday. The latest offer is $27.50 per share, some 20% higher than the $23 per share offered by Insight Venture Partners back in early March. Just to put some context around the price, Quest stock hasn’t changed hands above $30 in 11 years.

And yet, even with the four rounds of bumped bids, Quest is still trading slightly below the median valuation of significant acquisitions so far this year. According to The 451 M&A KnowledgeBase, the 50 largest transactions in 2012 have gone off at 3 times trailing sales. The latest bid for Quest values the company at 2.7 time trailing sales.

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