The $23 per share offer represents a premium of about 19 percent to Quest's Thursday close. Shares of the company were trading at $23.69 on Friday morning, indicating that investors are expecting a higher bid.

The deal includes a "go-shop" period of 60 days to solicit other proposals, Quest said in a statement.

Aliso Viejo, California-based Quest will pay Insight -- a private equity and venture capital firm focused on software and internet -- a break-up fee of $4.2 million during the "go-shop" period if it receives a higher bid.

After the 60-day period, the fee will be $6.3 million.

Quest, which makes software that monitors large amounts of data flowing through corporate networks and the Internet, will continue to be led by current Chief Executive Vinny Smith, who took over last month after Doug Garn stepped down citing poor health.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das)

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