By Bloomberg

(Bloomberg) — BMC Software Inc. and CA Inc. are considering a potential deal that would see the software companies combine as part of a transaction to take CA private, according to people familiar with the process.

If a deal goes ahead, it would be the biggest leveraged buyout of a technology company since a group led by Michael Dell and Silver Lake Management agreed to buy Dell Inc. in 2013 in a transaction valued at almost $25 billion. CA shares closed at $31.58 on Tuesday, valuing the New York-based company at about $13.2 billion. They rose 12 percent in early trading Wednesday.

The companies have approached banks about putting together a debt package to finance a BMC purchase of CA, said the people, who asked not to be identified because the information isn’t public. Talks are at an early stage and there is no guarantee a deal will be reached, the people said.

BMC has been owned by Bain Capital and Golden Gate Capital since 2013, when the buyout firms took the company private in a deal valued at about $6.9 billion, according to data compiled by Bloomberg. The firms, which took a $750 million dividend from the company in 2014, may also put in new equity to help finance the deal, the people said.

BMC, Bain and Golden Gate declined to comment. Representatives for New York-based CA didn’t immediately respond to requests for comment.

LBO Slowdown

Leveraged buyouts — in which financial sponsors raise a large amount of debt to finance an acquisition — have become rarer since the 2008 financial crisis led to tighter rules on lending at banks. Private equity firms led 19 purchases worth more than $10 billion from 2005 to 2007, according to data compiled by Bloomberg. Those mega deals yielded disappointing returns compared with the median profit on all private equity transactions during the same period, spurring buyout firms to approach large buyouts more cautiously.

Since the start of 2008, just one such deal other than Dell has been led by a private equity firm: Apollo Global Management LLC’s $12.3 billion acquisition of ADT Corp. in 2016.

Buyout firms are getting more creative as they seek to deploy about $600 billion of dry powder on deals, according to Stephanie Cohen, head of financial sponsors M&A at Goldman Sachs Group Inc.

“They’re taking their portfolio companies and turning them into strategic acquirers,” Cohen said Tuesday in a Bloomberg TV interview at the 2017 Goldman Leveraged Finance Conference in California.

Computer Associates

CA, led by Chief Executive Officer Michael Gregoire, develops applications for cloud and mobile computing, with most of its revenue coming from maintenance contracts and subscriptions. Founded in 1976 as Computer Associates International, the company went public in 1981 and eight years later was the first software company to reach $1 billion in revenue, according to its website.

It has grown through smaller acquisitions, agreeing to buy app-security testing firm Veracode Inc. for $614 million in cash, after announcing the acquisitions of Automic Holding GmbH in 2016 as well as Rally Software Development Corp. and Xceedium Inc. in 2015.

Acquisitions have helped offset slowing organic sales growth at CA’s mainframe business, according to a report from Bloomberg Intelligence. The company’s mainframe solution unit generated about 54 percent of revenue in fiscal 2017, while enterprise solutions contributed 39 percent and services made 7 percent.

Legacy mainframe software vendors have proved popular among private equity firms looking for stable returns from their subscriber base. A year after the BMC buyout, Compuware Corp, a Detroit-based seller of business software, agreed to be taken private by Thoma Bravo in a deal valued at $2.5 billion, following pressure from activist investor Elliott Management Corp.