CDK Global's (CDK) - Get CDK Global Inc Report shares spiked upwards early Wednesday on news that it had reached a settlement with activist investor Elliott Management's Paul Singer to add two dissident directors to its board in a move that could help drive a sale of the automotive software maker down the road.

Specifically, the Hoffman Estates, Ill.-based company said it will expand its board size from eight to ten and add two independent directors identified by Elliott, which has an 9.3% stake including equity and derivatives. In addition, Elliott and CDK have a standstill agreement in place, which prohibits the insurgent fund from launching a contest for the next eleven months. In other words, Elliott, which is no stranger to director-election campaigns, could launch a proxy contest at CDK's 2017 annual meeting if it felt management there wasn't following through on the fund's suggestions.

And according to an person familiar with the situation, the two incoming directors will have a software background and keep an eye on CDK to ensure that a capital allocation and business realignment plan the company has been engaged in will continue.The activist fund launched its public campaign in May with a letter, after months of private discussions, and suggested that the company's stock price could rise to $81 a share in 14 months if it streamlined its operations. Jesse Cohn, a senior portfolio manager at Elliott, said in the letter that CDK was "profoundly undermanaged" and he also urged it to launch either a large one-time share buyback or an ongoing repurchase program.CDK's shares traded early Wednesday at $59.72 a share, up 5% from Tuesday's close of $56.81.

In the May letter, Cohn urged CDK's board urging it to set up a growth plan focused on margin improvement, stock buybacks and to explore a sale. In a securities filing, Elliott suggested that it might express its views to "potential acquirers, service providers and financing sources.

And an investor familiar with the situation suggested that CDK would likely be sold to a private equity firm in the next couple of years, perhaps sooner, following up on a long string of automotive software company take-private deals. Case in point: Westlake, Texas-based automobile insurance software maker Solera Holdings Inc. announced in September that it had agreed to be taken private by Vista Equity Partners for approximately $6.5 billion. In addition, buyout shop Thoma Bravo LLC last month acquired Trader Corp., a Canadian digital automotive software provider. In addition, KKR & Co. (KKR) owns an auto software company.

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He added that a number of private equity firms have approached CDK as an acquisition target. Potential buyers for CDK, he noted, included Blackstone Group (BX) - Get Blackstone Group Inc. Class A Report , Silver Lake Partners, Hellman & Friedman and Thoma Bravo. "The whole space is private and this will end up in one of their hands in someway," he said. 

Under pressure from Elliott, CDK has already significantly hiked its capital distribution plan. In a statement, CDK CEO Brian MacDonald noted that the company accelerated the pace of capital return with its recent commitment to return $1 billion by the end of calendar year 2016, which is a year earlier than its prior commitment. In addition, he added that more share repurchases and continued dividends are expected after that.

In addition, at least one other activist, Sachem Head Capital Management's Scott Ferguson, has a stake in CDK Global. In 2014, Sachem said it planned to hold discussions with CDK over governance, and board composition and strategic plans. However, the New York-based fund cut its stake from about 10%, including derivatives and equity, in 2014 to less than 5% according to a July securities filing.

Elliott's Cohn noted Wednesday in a statement that he believed CDK's planned cost and business realignment will "improve" its growth profile and ability to deploy capital. "We expect these steps to deliver meaningful value to CDK's customers and shareholders," Cohn said in a statement.

Morgan Stanley (MS) - Get Morgan Stanley (MS) Report is acting as financial adviser to CDK and Weil, Gotshal & Manges is acting as legal adviser on the settlement. The Weil team includes partners Michael Aiello, Sachin Kohli and associates Megan Pendleton and Reid Powell. 

This article originally appeared in The Deal, a sister publication of focused on deals and dealmakers, onAug. 3. For more information about The Deal click here.