Will 2009 mark a resurgence for private equity?

2008 was one of the worst years for private equity deal volume in awhile -- an abrupt end to the boom years marked by the high-profile bankruptcies of companies like Linens n' Things.

But that could be changing: sort of. The number of bad deals of the past few years has led to a growth in "loan to own" deals: vulture private equity firms that lend money to companies struggling under the weight of earlier buyouts with the goal of gaining control over the equity.

The Wall Street Journal reports (subscription required) that buyout flops like Real Mex Restaurants and Bally Fitness are finding themselves under the ownership of new private equity firms after the original deals go south.

But 2009 could also represent a comeback for private equity in the traditional sense if credit markets loosen up. Interest rates are at historic lows and the stock market has taken a pounding leaving a number of profitable companies trading at valuations that make them extremely attractive takeover targets.

If the credit markets return to normal levels of activity, private equity could be a major catalyst for the market's rebound over the next few years by taking private many of the undervalued companies that are driving the market down.