March 9, 2012 3:28 PM

Four Firms Advise on Proposed Quest Software Buyout

Posted by Julie Triedman

Quest Software, Inc., an Aliso Viejo, California–based provider of data-protection and database-management software, said Friday it has agreed to be taken private by venture capital firm Insight Venture Partners.

Quest said in a statement announcing the buyout that Insight Venture’s $23-per-share, all-cash offer values the company at about $2 billion, and that the sale price represents a 19 percent premium over Thursday’s closing price of Quest shares.

Insight Venture’s special limited partners include former U.S. Treasury secretary Robert Rubin and onetime Goldman Sachs Group chairman Stephen Friedman. Quest’s announcement said that, subject to a successful closing, the company expects to continue to be led by current Chairman and CEO Vincent Smith. As part of the agreement, Smith will roll his 34 percent Quest stake into a newly created entity and vote them in favor of the deal, according to the company’s announcement. The deal would still require a majority of the remaining Quest shareholders to vote in favor of the transaction.

On Friday, with the company’s share price surging higher than the offering price, analysts told Bloomberg that they anticipated alternative bids during a 60-day “go-shop” period that a special committee of the company’s board negotiated as part of the agreement. Under the deal’s terms, Quest would have to pay a relatively small $4.2 million breakup fee if it accepts a higher bid during the period, and $6.3 million if it accepts one after the period closes.

As outside counsel on the transaction, Quest is relying on a Latham Watkins team led by corporate partners Charles Ruck, Michael Treska, and R. Scott Shean in the firm’s Orange County, California office, and Jason Silvera in Los Angeles. Antitrust partner Michael Egge in Washington, D.C.; finance partner Glen Collyer in Los Angeles; tax partner Pardis Zomorodi in Los Angeles; employee benefits partner Bradd Williamson in New York; and IP partner Anthony Klein in Silicon Valley are also assisting.

According to Latham, the firm has represented Quest in corporate matters for several years. The company’s general counsel is David Cramer.

The Quest special committee is being advised by a Potter Anderson Corroon team led by corporate partner Mark Morton and litigation partner T. Brad Davey. Quest CEO Smith is being advised by Cadwalader, Wickersham Taft, with private equity group head R. Ronald Hopkinson leading a New York-based team that also includes corporate partners William Mills III, Gregory Patti, Stewart Kagan, and tax partner Linda Swartz.

For its part, Insight Venture has tapped Willkie Farr Gallagher. Gordon Caplan, chair of the firm’s private equity practice, and corporate partners Morgan Elwyn and William Dye are handling the transaction. Willkie, and specifically Caplan, have advised Insight on a host of transactions since 2004, according to the firm’s Web site. Blair Flicker is Insight’s general counsel and managing director, while Edward Delk is the New York-based firm’s chief compliance office and assistant general counsel.

Quest said it expects the deal to close in the third quarter of this year, subject to the approval of regulators and a majority of shares owned by stockholders other than Smith.

According to Quest’s statement, the buyout will be funded with a $210 million equity commitment from Insight; a rollover of Smith’s stake; and $1.195 billion in debt financing from J.P. Morgan Chase Bank N.A., RBC Capital Markets, and Barclays Capital; RBC and Barclays also acted as financial advisors on the deal. (Morgan Stanley acted as financial advisor to the special committee.)

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