This Could End the Megabuyout Drought.
That’s because BMC is essentially a strategic buyer that can afford to pay up because of the potential synergies it can extract.
If that sounds familiar, it’s because it’s the same dynamic that facilitated the most recent (and only) megabuyout since Dell: Apollo Global Management’s $12.3 billion acquisition of ADT Corp., which was combined with Protection 1, another home-security company owned by the New York firm.
So how would the math work?
Even including an average 25 percent deal premium, CA isn’t expensive at around 11.1 times its projected fiscal 2018 Ebitda or 4 times its revenue: Bain and Golden Gate will likely have to come up with a chunk of equity, but that can be minimized if CA’s largest shareholders — Martin Haefner and Careal Holding AG, the holding company of Haefner and his sister — commit to rolling all or part of their collective 25 percent stake in the company.
CA’s enterprise value, including a deal premium, is already roughly $16.5 billion and BMC itself already has more than $6 billion of outstanding debt, according to data compiled by Bloomberg.
That would result in a leverage ratio of almost 9 times the combined company’s Ebitda, which is high, but not uncommon for software companies.
There is one potential sticking point to a deal: Jefferies analysts have flagged potential antitrust issues in the mainframe market, which they describe as an oligopoly controlled by CA, BMC and IBM.
No doubt, this megadeal will test the buyout market.
This assumes 2 percent annual Ebitda growth for BMC, whose financials haven’t been available since its buyout.