According to the New York Post, luxury goods maker Burberry Ltd. (OTC: BBRYF) could be a buyout target for a competitor like Coach Inc. (NYSE: COH). The speculation started with a research report from Merrill Lynch. According to the Post, "Merger activity is likely to pick up this year in the $218 billion industry as family-owned companies face generational transitions, while 'predators' such as LVMH Moet Hennessy Louis Vuitton SA are flush with cash."

With the private equity boom subsiding, strategic mergers and acquisitions are likely to take center-stage -- ya know, those deals that take place based on some goal other than financial engineering.

If you're interested in finding other fashion stocks that might be in play (or might just make good investments for other reasons), ApparelSearch.com has a pretty comprehensive list of the publicly traded fashion stocks. Buyout targets generally will trade at reasonable P/E and P/Cash Flow ratios, and will have clean balance sheets.

Given the status of the credit markets, companies seeking to acquire will need to have strong cash flow and balance sheets as well.