This week, I was on a panel at the USC School of Business. One question I got was: what is private equity?

I had to think about it. First of all, the traditional definition is fairly straightforward. That is, private equity funds buy companies using large amounts of debt.

But what happens when the debt market goes into meltdown?

Well, interestingly enough, private equity firms learn how to adapt. Perhaps, the best example is TPG.

In fact, the firm had a busy week. First, TPG has assembled a group of investors to buy a piece of Washington Mutual, Inc. (NYSE: WM) for $7 billion. Next, the firm got a piece of SIA International, which is a leading drug distributor in Russia. And, finally, TPG has joined a group that plans to purchase $12 billion in leveraged loans from Citigroup Inc. (NYSE: C).

In other words, this is really not traditional private equity. Basically, private equity firms now need to find opportunities in growth markets; take minority positions; and think about buying debt.

However, such things are not easy -- and go beyond the simple financial engineering that was the hallmark of the dealmaking of the boom times. In other words, private equity firms really need to work for their profits now.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates Mergerbook.com.