By David Benoit

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Institutional Shareholder Services is recommending shareholders support the buyout of Dell Inc., an opinion that may surprise even those hoping for it and could spell the end of five months of deal drama.

Here are some highlights from the ISS report.

Summary paragraph – “After evaluating the risk of accepting the offer … ISS recommends clients vote FOR this transaction, which offers a 25.5% premium to the unaffected share price, provides certainty of value, and transfers the risk of the deteriorating PC business and the company’s on-going business transformation to the buyout group.”

Speed is ‘crucial for success’ for transformation – “There is no question that making major changes in a public company setting adds complexity to an already difficult task. Dell faces intense competition – lower cost products from Asia, threats from new entrants and the Cloud – and the technology Dell aims to provide is ever-changing. In announcing the deal, however, the buyout group indicated it would not change the transformational strategy itself. In explaining why the go-private is in the company’s best interest, the CEO has argued that the transition is both easier and quicker as a private company, eliminating the need to explain increased spending to stock analysts, or meet investor expectations which might have the effect of slowing progress on the transformation. Given that a business transformation in this industry, which is continuing to transform itself, will likely have a moving target, speed of transformation is especially crucial for success.”

New Dell is on track – “The board, too, argues that the market has ignored Dell’s progress to this point, highlighting that as non-PC revenue has grown, overall trading multiples have contracted. Shareholders must consider, however, that despite recent trading levels – attributed to the PC business declining faster than anticipated – Dell’s acquisitions are exceeding management’s expectations. Despite poor PC fundamentals, in other words, ‘New Dell’ is still on track.”

Icahn a risky horse: Regarding Carl Icahn’s competing proposal to buy up to 1.1 billion shares of the total 1.7 billion shares for $14 each and replace the Dell board, ISS raised questions about whether he would win a proxy fight, even if shareholders reject the $13.65 deal. “Shareholders who prefer to cash out at $14, rather than $13.65, may be completely willing to swap out the entire board, if that’s what it takes to cash out. But they may not be able to do it alone, if a substantial number of other shareholders who don’t want to cash out are also reluctant to change horses midstream—particularly when the increase in financial leverage on the recapitalized company they will continue to own effectively means the stream just got a little stronger and a little deeper.”

What ISS was deciding on: “Because shareholders cannot immediately accept $14 in cash even if they vote down the proposed buyout, however – they must also vote to replace the entire board and the CEO through a proxy contest at a subsequent annual meeting, and even then may end up with cash and equity if the envisioned self-tender is oversubscribed – the choice remains whether $13.65 in cash now is a better alternative than continuing to hold equity in a publicly-traded Dell.”

Conclusion: “In the end, shareholders must weigh the bullish enthusiasm of Icahn, SAM, and several other shareholders who have publicly declared the offer price too low against the apparently increasing headwinds in Dell’s transformation process, and the signals transmitted by the lower trading prices and analyst price targets immediately prior to any takeover speculation. Given the 25.5% premium to the unaffected share price, the certainty of value provided by the all-cash consideration, and the fact that the transaction would transfer to the buyout group the risk of the deteriorating PC business and the company’s on-going business transformation, a vote FOR the transaction is warranted.”

THE WALL STREET JOURNAL.

By SHIRA OVIDE, DAVID BENOIT and JOANN S. LUBLIN

A leading shareholder-advisory firm said Dell Inc. stockholders should vote for a $24.4 billion effort to take the computer maker private, a decision that may seal the controversial buyout by founder Michael Dell.

The recommendation from Institutional Shareholder Services Inc., which advises investors how to vote on corporate issues, improves the odds of the buyout winning approval from Dell stockholders in a vote slated for July 18.

The ISS recommendation may take the wind out of critics' arguments that the deal is unfair, and it eases the pressure on Mr. Dell to bankroll a higher price to win over skeptics.

ISS said the transaction "offers a 25.5% premium to the unaffected share price, provides certainty of value, and transfers the risk of the deteriorating PC business and the company's on-going business transformation to the buyout group."

In making the recommendation, ISS agreed with the buyout group's arguments that taking Dell private would make the transformation faster, and therefore more likely to succeed.

"A business transformation in this industry, which is continuing to transform itself, will likely have a moving target, speed of transformation is especially crucial for success," the report said.

The proxy advisory firm also strongly criticized activist investor Carl Icahn's proposal, which envisioned borrowing money to pay out shareholders rather than use such funds for a buyout. Its report said "the undeniable risk of the leveraged recapitalization proposal, however, is that shareholders cannot actually elect it in lieu of the proposed go-private transaction."

Mr. Icahn couldn't immediately be reached for comment.

The report comes after investors on Friday sent shares of Dell down to $13.03, their lowest since the buyout offer was announced in February and a price that could help make the $13.65 offer look appealing.

Shares were up 19 cents, or 1.5%, to $13.22 in premarket trading Monday.

People familiar with the buyout group's thinking have considered the ISS report pivotal in potentially swaying a close vote one way or the other.

The report marks the latest development in one of the most dramatic deal situations of the year, one that has seen influential Wall Street investors from Mr. Icahn to Blackstone Group LP sizing up the worth of the Round Rock, Texas company.

In a somewhat ironic twist, both the special committee of Dell's board that negotiated the deal and Mr. Dell himself have been arguing against the company's prospects as a public entity in an effort to convince shareholders the pending offer is worth taking.

Mr. Dell, the company's founder, chairman and chief executive, and private-equity firm Silver Lake Partners struck an agreement in February to buy Dell's publicly held shares for $13.65 each.

The special board committee negotiating the deal for Dell said in a statement Monday that it was pleased with ISS's recommendation.

ISS did raise concerns about the sales process that the special committee ran, saying it "may have left something to be desired." The firm questioned why only a limited number of private-equity firms were contacted in the early stages, before a deal was struck with Silver Lake. It added that the later go-shop period inviting other bidders shouldn't be counted on as a "panacea" to finding the best offer.

The special committee has often defended the process as robust. It decided to contact a limited number of bidders early on because it and its advisers believed they were the most likely bidders and to reduce the risk of a leak, according to a filing.

The $13.65-a-share offer is about a 25% premium to where the stock was trading before news broke that Mr. Dell was talking with private-equity investors about a buyout.

Mr. Icahn and some other Dell stockholders early on bashed the deal, saying Mr. Dell is unfairly taking advantage of a low point in his company's fortunes to buy his company too cheaply and cutting public shareholders out of any turnaround. Mr. Dell has said his company is ailing and needs to craft a turnaround free from the scrutiny of public shareholders.

Many big investment firms make their own decisions on how to vote on corporate deals, and are unlikely to be swayed by proxy advisers. Some investment funds do rely heavily on the recommendations of the advisers.

Still, corporate ballots sometimes go against the recommendations of proxy firms. In 2011, ISS recommended shareholders reject a sale of J. Crew Group Inc. to a group that included the company's CEO. Shareholders overwhelmingly voted for the deal. ISS urged investors to approve a 2010 takeover of energy company Dynegy Inc., and shareholders voted the deal down. This year, shareholders overwhelmingly rejected a proposal to strip J.P. Morgan Chase & Co. CEO James Dimon of his chairman role, even though ISS had endorsed the proposal.

Write to Shira Ovide at shira.ovide@wsj.com, David Benoit at david.benoit@dowjones.com and Joann S. Lublin at joann.lublin@wsj.com