The Carlyle Group, which is a top private equity firm, got its start by making deals in the government and defense sectors (back in the 1980s). In fact, its co-founders have extensive federal government experience.

Well, the firm is going back to the future. That is, Carlyle announced a $2.54 billion purchase of Booz Allen's government consultancy (for a majority stake). Apparently, both sides have been working on the transaction since the beginning of the year.

The Booz Allen unit has roughly 18,000 employees and has mega clients, such as the NSA, Department of Homeland Security, the World Bank and the Department of Defense. Essentially, the unit had little synergy with the core business of Booz Allen, which is focused on commercial management consulting. But, of course, there should be lots of strategic value for Carlyle's portfolio of businesses.

And, the Booz Allen government unit has been a strong business, especially in light of the rise of global terrorism.

Something else: this is yet another sign that the buyout market is beginning to improve.

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.

The meager IPO market has been tough for the private equity crowd. After all, this is a key way for them to make big returns for their investors.

But Thursday, a private-equity-backed firm -- Verso Paper (NYSE: VRS) – hit the public markets. The company priced 14 million shares at $12 each. Unfortunately, by the end of the trading day, the stock was at $10. The company originally wanted to issue 18.8 million shares at a price range of $16-$18.

Verso's private equity sponsor is Apollo Global Management LLC, which bought the company back in 2006.

The company is a major supplier of coated papers for catalog and magazine publishers. Some of the customers include Condé Nast Publications, National Geographic Society, Avon Products and Sears Holdings

However, with high energy prices and pesky inflation, Verso's industry has come under much pressure. As a result, there have been a variety of mill closings from the competition, which should ultimately help the survivors. What's more, Verso has built a low-cost structure.

But as seen with Verso's stock performance Thursday, it's not a story Wall Street is interested in right 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.

So-called "trader talk" can be pretty rough. After all, Wall Street can be stressful (especially lately).

But, when you are the CEO of a major financial services company, you are expected to keep your language PG.

Well, Steve Schwarzman -- who is the CEO of The Blackstone Group, L.P. (NYSE: BX) -- perhaps didn't get the memo. Actually, maybe he thinks he still runs a private firm.

In a recent investor conference, Schwarzman was quite colorful in describing it's aborted $1.7 billion buyout of PHH Corp. (which got ensnared in the subprime mess).

So what do you do if your company produces mostly heavy, inefficient vehicles as gas soars past $4 a gallon? Some might say you should produce more efficient cars. But not Chrysler, which has instead opted to make gas cheaper, guaranteed!

Today, Chrysler CEO Bob Nardelli announced that anyone crazy enough to buy a heavy, high-horsepower, low-mileage Chrysler product before May 31 will be able to buy gas for no more than $2.99 a gallon for three years. Just take your shiny new Aspen or PT Cruiser to the gas station and use your special gas card; Chrysler will pick up the cost over $2.99 a gallon.

Some critics are calling this plan a cheap gimmick. But there is no denying that Chrysler is at a disadvantage relative to General Motors (NYSE: GM) and Ford (NYSE: F) when it comes to offering new cars that get decent mileage. And it is light years behind the auto design leaders, Toyota (NYSE: TM) and Honda (NYSE: HMC). So it needs some kind of gimmick to help its dealers clear out the cobwebs that are quickly forming on their lots.

In recent years, Chrysler has relied heavily on trucks and SUVs for sales, and its hot new cars like the Challenger are gas guzzlers. (Hey, your Hemi sure is fast! Sorry about the 11mpg!) Its lineup is in desperate need of an overhaul and products that offer decent mileage. But developing new cars is difficult and very expensive, and it's not clear that Chrysler's owner, Cerberus Capital Management, has the money to do it. The alternative -- advertising and sales gimmicks, long favorites in Detroit -- is cheap by comparison.

This promotion might work, at least for a few weeks. But it points to much larger problem: Chrysler doesn't have the goods to compete right now, and it's not clear when it will, if ever.

It's been slow, but the private equity folks are starting to warm up to dealmaking. In fact, a key deal came last week as Nordic Capital Fund VII and Avista Capital Partners agreed to plunk down $4.1 billion for ConvaTec, a division of Bristol-Myers Squibb Co (NYSE: BMY).

ConvaTec, which focuses on wound care, has been a star performer over the years. What's more, the deal will allow Bristol-Myers to devote its resources to its core pharma business, which certainly has some challenges – especially as drugs come off patent.

In addition, the deal has a global flavor as Nordic Capital is in Europe and Avista in the US.

It also looks like Bristol-Myers is not finished with its own dealmaking. For example, the company says it plans to launch a public offering of its Mead Johnson division.

What this really looks like, however, is that all these actions, for the most part, may just be a prelude for Bristol-Myers to sell itself to a mega pharma company.

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.

Of course, the subprime crisis is a key element of the credit crunch. But there has also been another force: the huge build up of leveraged loans for mega buyouts.

Well, with the help of sovereign wealth funds -- and even some private equity firms, like TPG -- the subprime problem appears to be improving. And, interestingly enough, it looks like banks are also effectively dealing with the leverage loan overhang. This according to a piece in FinancialNews.com.

Basically, the backlog is now at $91 billion (which is a drop of nearly 60% so far this year). But we are already seeing signs that banks are opening up to new loans, such as with Basell's buyout of Lyondell Chemical Company. The major banks need the deal flow from private equity firms because of the juicy fees. So it's no surprise that we've seen a lot of action in getting things moving again.

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.

They say private equity is the smartest of smart money, able to generate massive profits out of thin air. Well, the folks at Apollo Management probably aren't feeling too smart today, as their $1.3 billion investment in Linens 'n Things has taken a significant turn for the worse.

Linens 'n Things has now confirmed the growing speculation that it would declare bankruptcy. As Zac Bissonnette reported in April, the company lost $242 million in 2007, after the company had gone private in February of 2006. In the last few months, it was said to be having trouble with its suppliers, which rightly feared providing it with credit and merchandise.

The odd thing is that many private equity funds saw the housing and credit crunch coming. It would stand to reason that a billion dollar chain that feeds on the housing market may not be the best investment towards the end of a great speculative housing boom, but I guess the people at Apollo thought they could work their magic whatever the market conditions.

The good news is that Linen Holdings has secured $700 million in financing from GE Capital. This should enable the company to continue operating as it restructures, although it will close 120 stores. But at least the majority of its 17,000 employees still have hope that they won't lose their jobs, at least not right away.

When Eos Airlines got its start in 2005, there was lots of buzz. Essentially, this was a New Age carrier that would provide business travelers with high-end comforts, such as more legroom as well champagne, gourmet foods, and so on. In fact, it called itself the "Unairline" (yes, it sounds kind of Orwellian).

Well, it's now a non-airline. With surging oil prices – and an ailing economy – Eos is now in bankruptcy and all operations have ceased. According to the front page of Eos' website, there was actually a term sheet for an investment. But somehow "issues arose" that killed the deal.

Keep in mind that the Eos charged premium airfares. Yet, it was still not enough. The company faced intense competition from the main carriers (which provide business class).

Something else: Golden Gate Capital, a private equity firm, was the largest equity holder, with a 47% stake.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

Over the years, there has been a symbiotic relationship between investment banks and private equity firms. And it has been quite profitable (in terms of fees) -- that is, until recently.

Now, with investment banks ailing, the relationships may get even stronger. In other words, private equity firms -- which are bulging with cash -- may be providers of much-needed capital.

According to a piece in the Financial Times [a paid publication], there have been some discussions between TPG and Merrill Lynch (NYSE: MER) regarding financing. Funny enough, Merrill's CEO, John Thain, has been fairly clear that his firm doesn't need the money. But, hey, things can change, right? So why not keep the channels open? That's what good investment bankers do.

However, the potential linkup does raise some interesting issues. After all, there could be serious conflicts of interest. Investment banks are supposed to provide unbiased advice to their clients. But, is this possible if TPG is a bidder for a Merrill client?

True, Wall Street is known for dancing with these conflicts (if not relishing in them). But, I'm sure clients will get a little squeamish.

Besides, as a major investor, TPG is likely to have lots of visibility into Merrill -- which may provide a strong competitive position. In a way, this could mean that rival investment banks will be standoffish when dealing with TPG.

Then again, another possibility is that Merrill and TPG will forge a major alliance, becoming the private equity division. This could be attractive to Merrill, which is currently hamstrung because of the credit crunch.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and mid-size businesses.

Every so often, you hear about an idea that is so godawfully bad that you have to giggle. I'm not talking about minor stupidities like a Porsche minivan or a movie based on a video game. No, I'm talking monstrously bad, like McDonald's selling sushi, condoms marketed to Catholics, or beer made for toddlers: ideas that are so hideously terrible that they are epic.

Here's an example: Llewellyn Werner, the Chairman of C3, a Los Angeles-based holding company for private equity firms, is investing $525 million into an amusement park in downtown Baghdad. You heard me right: Baghdad Disney.

I'm not even going to go into the terrible jokes that this brings to mind, although I already have some great ideas for colorful characters that could wander through the park in big animal suits. Regardless, "The Baghdad Zoo and Entertainment Experience" will have a skateboarding area, a concert theater and a museum, and is being developed with the help of the group that built Disneyland. While I admire Werner's dedication to bringing fun and entertainment to the embattled residents of Baghdad, I can't help but wonder about the wisdom of building an American-style amusement park in an area where any reflection of American culture is a red flag. Werner, however, is convinced that the people of Iraq will embrace the lighthearted fun of his new venture.

On the other hand, maybe he's right. "Baghdad Disney" might be just the thing to bring American values to Iraq. I wonder if there are any plans in the works for a water park!

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. After a half-hour in any amusement park, he starts to plot against American culture.

Fortune and BusinessWeek are piling on the story of Harbinger Capital Partners, a $19 billion hedge fund, seeking to take over the New York Times (NYSE: NYT). Harbinger now owns 19% of its Class A shares. Of course, Harbinger is not the only threat to management of the Times -- News Corp.'s (NYSE: NWS) Rupert Murdoch is doing his part as well. Will Steve Rattner, a long-time friend of Times publisher Arthur Sulzberger and Managing Principal of Quadrangle Group, come to the rescue and take the Times private?

In play here are Phillip Falcone, a Harbinger partner who made $1.7 billion last year, and the quaint idea of protecting a media company's founding family by maintaining two classes of stock: Class A for the public to make insiders liquid and Class B for the insiders. Murdoch and Sulzberger enjoy protection for their family dynasties thanks to that two-tiered structure.

Falcone thinks that the Times is leaving huge amounts of money on the table by not "monetizing" all the comments on its stories. What sparked this idea was a January opinion piece by Caroline Kennedy comparing Barack Obama with her father, President John F. Kennedy. There were only a few comments about the article on the newspaper's Web site, nytimes.com, but there were hundreds on Huffington Post and Digg.com. BusinessWeek quotes Scott Galloway, founder of hedge fund Firebrand Partners and Falcone friend who said: "We came to the collective conclusion that there was so much upside in terms of billions of pages the paper wasn't monetizing. He [Falcone] never looked back."

Lately, there have been some scary stories -- such as in BusinessWeek and Forbes.com -- about the buyout of Freescale, which is a major semiconductor operator (the transaction came in September 2006 at $17.6 billion).

The latest earnings report was anemic. Plus, the company's bonds are selling at distressed levels. In fact, the CEO -- Michel Mayer -- quit his post in February (but don't cry for him as he took millions in a nice payday). And of course, Freescale's key customer, Motorola, Inc. (NYSE: MOT), is ailing.

So, might this prevent further buyout deals in the semiconductor space?

Warburg Pincus, which is a top private equity firm, got its start over 40 years ago, bringing a professional approach to the business. Since then, the firm has invested $29 billion in more than 585 companies across 30 countries.

Well, now the firm has even more firepower for deals as it has raised a hefty $15 billion for its next fund. Some of its marquee investors include Washington State Investment Board and GE Asset Management.

But with the credit crunch, what can Warburg Pincus do with the money? Well, keep in mind that the firm has a growth orientation, which has less reliance on debt sources. What's more, Warburg Pincus has a global platform, which is particularly attractive to institutional investors.

Interestingly enough, Warburg Pincus has ventured into some distressed investing. The most notable transaction was a $1 billion investment in MBIA (NYSE: MBI), which suffered from bad timing (the deal was struck late last year).

But this doesn't seem to be much of a concern for Warburg Pincus. After all, the firm has undergone a variety of market cycles and realizes that real returns take time.

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.

So far this year, it's been quite volatile in the food markets -- putting lots of pressure on the supply chain. But, there is help from an upstart company, SignalDemand, which uses complex algorithms to manage pricing, supply utilization, and product mixes. In fact, some of the customers include Cargill, Farmland Foods, Hormel and Ventura Foods.

Actually, SignalDemand recently snagged $20 million in venture capital from InterWest Partners, Hummer Winblad Venture Partners, General Catalyst and Catamount Ventures.

"With our software, we can add 2% to 4% to the bottom-line," said Michael Neal, the CEO and founder. I recently met up with him while in San Francisco.

No doubt, Neal is one of the thought leaders in the data analytics space. He cofounded DemandTec (Nasdaq: DMAN), which is the largest provider of Consumer Demand Management (CDM) software for retail price and promotion optimization. He even holds a variety of patents.

Interestingly enough, in his office, you will find a chalk board – with many equations. What's more, SignalDemand's employees are a high-caliber group, with economists and statisticians. Yes, this is certainly a next-generation company.

"I think that analytics companies are the next big opportunity," said Neal. "Just look at the impact on financial services, airlines and hotels. We will see mathematical approaches applied to many other industries, such as cattle, lumber and so on."

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.

KKR Financial Holdings LLC (NYSE: KFN) is a pioneer of the private equity world. However, over the past few years, things have changed significantly. Besides the credit crunch, dealmakers must also deal with the complexities of politics. After all, a buyout can have a major impact on a community -- in terms of jobs and the ecosystem.

Realizing this, KKR is bulking up its political heft. This week, the firm announced that it has hired Kenneth Mehlman as a managing director and head of public affairs.

Mehlman has a strong resume, having served as the chairman of the Republican National Committee. He was also the campaign manager for President George Bush in the 2004 election. The latest gig for him was as a partner at Akin Gump. Interestingly, one of his top clients was KKR.