Private equity on the wild side

Traditionally, private equity firms have focused on mainstream businesses. But, we are seeing more and more deals in the tech sector. In fact, Google Inc. (NASDAQ: GOOG)'s buyout of DoubleClick was a sign that private equity can make a mint from tech.

According to a piece in The Wall Street Journal [a paid service], there's another important deal. That is, Providence Equity Partners has purchased a majority stake in NexTag for roughly $830 million.

Basically, NexTag is a comparison shopping site. And, yes, the space has been full of M&A deals over the past couple years -- such as Shopzilla, eBay Inc. (NASDAQ: EBAY)'s Shopping.com and so on.

Because NexTag is privately held, it's tough to gauge the revenues, but the rumor is that the figure is in the $200 million range. Thus, it looks like Providence is paying a hefty premium (at least by private equity standards).

My hunch is that this is a late-stage funding prior to an IPO or perhaps a sale to a major strategic player. But, this has historically been the role of VCs, not private equity firms. Yet with gazillions of dollars in the private equity space, we're probably going to see more unconventional deals.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.