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Quest Software Acquired: Private Equity Buys IT Management, Security Software Company (Again)

Private equity firm Clearlake Capital Corp. is acquiring IT management and security software company Quest Software and its One Identity/One Login business from Francisco Partners, the companies have disclosed.

This is technology M&A deal number 739 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

Quest Software Acquired: IT Management, Security Software Deal Valuation

Financial terms of this deal were not disclosed, though some financial metrics surfaced in The Wall Street Journal. Indeed, the deal values Quest Software at $5.4 billion including debt, and 10.9 times Quest's EBITDA (earnings before interest, taxes, depreciation and amortization) for the last 12 months, according to a Wall Street Journal report.

Francisco Partners and Elliott Management have owned Quest Software since acquiring the business from Dell Technologies in 2016. That move helped Dell to strengthen its balance sheet for the massive EMC buyout that year.

Under Francisco Partners' ownership, Quest Software in 2016 also broke apart from SonicWall, a firewall provider that has evolved into a unified security company focused on MSPs and MSSPs.

Quest Software Business Evolution

Quest underwent a business transformation by 2020, naming Patrick Nichols as CEO and hiring multiple CXOs as his lieutenants. Quest also shifted from client-server software to cloud-based solutions. The journey involved organic R&D (research and development) and acquisitions. Key IT management and security software purchases included:

  • January 2021: Erwin, a data modeling, data governance and business process modeling software company.
  • 2020: Quadrotech and Binary Tree for Microsoft 365 and Office 365 cloud migration software tools.
Patrick Nichols, CEO, Quest Software
Patrick Nichols, CEO, Quest Software

Meanwhile, Quest also has a mixed history in the MSP partner market. Under Dell's former ownership, Quest in 2013 shut down PacketTrap -- a software unit that developed RMM (remote monitoring and management) and PSA (professional services automation) software for MSPs. Many small business channel partners never forgot the move.

Fast forward to present day. Quest's core software products address such business and security needs as:

  • Microsoft Active Directory management and security;
  • data governance;
  • data operations;
  • data protection;
  • unified identity and security;
  • migration and consolidation; and
  • unified endpoint management.

Quest CEO Patrick Nichols and the current executive management team will continue to run the business. The deal is expected to close in Q1 of 2022, the buyer indicated.

Quest Software Acquired Again: Executive Perspectives

In a prepared statement about the deal, Nichols said:

“IT teams worldwide rely on Quest to help them solve critical challenges that enable business growth and address crucial strategic initiatives. Quest has evolved to become a market leader in identity-centric cybersecurity, data intelligence, and  IT operations management and I want to thank Francisco Partners for helping Quest realize this vision. Our new partnership with Clearlake will accelerate Quest’s momentum as a leader and innovator as we increase our investment pace in our core product roadmaps, cloud/SaaS offerings, and global presence. We will continue to expand our customer base as computing environments and related management, modernization, and security challenges, become more complex.”

Behdad Eghbali, managing partner, Clearlake Capital Group

Added Clearlake Managing Partner Behdad Eghbali:

“We have long admired Quest as a leading identity-centric cybersecurity, data intelligence, and IT operations management software platform and the Company’s software solutions that help secure enterprise IT environments. We are excited to partner with Patrick and Carolyn McCarthy, Quest’s CFO, to utilize Clearlake’s O.P.S. framework to help the Company strengthen its strategic growth plans including best practices to accelerate cloud/SaaS adoption and support its buy-and-build strategy.”

Clearlake Capital: Private Equity and Software Business Focus

Although Quest Software is best known in the enterprise software market, Clearlake Capital also is known for SMB-focused technology investments.

One example involves acquiring Endurance, a cloud company and hosting provider that serves small businesses. The Endurance portfolio includes Constant Contact, Bluehost, HostGator, and

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.