The trend of private equity firms buying out high tech companies continues. According to Bloomberg News, Silver Lake Partners and TPG will take Avaya Inc. (NYSE: AV) private for $8.2 billion -- the biggest LBO of a computer networking firm ever.

Investors will receive $17.50 a share. That's 4.7% more than yesterday's closing price and 28% more than before speculation about a purchase surfaced on May 29.

This is the latest in a string of high tech LBOs. Recent ones include:

• Acxiom Corp. (NASDAQ: ACXM), this computer and database services provider, said May 16 it's being bought by Silver Lake and ValueAct Capital Partners LP for about $2.24 billion.
• Alltel Corp. (NYSE: AT) this fifth-biggest U.S. wireless service, agreed May 21 to be bought by TPG and Goldman Sachs Group Inc. (NYSE: GS) for $27.5 billion.
• CDW Corp (NASDAQ: CDWC) agreed on May 30 to be acquired by Madison Dearborn Partners LLC for $7.3 billion.

I am not sold on the competitive advantages that will result from this deal. Maybe there's some overhead to be cut but I question how much private equity is willing to invest in R&D to jump start Avaya's product pipeline.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.

MOST NOTEWORTHY: Bioenvision (BIVN), Archstone-Smith Trust (ASN) and GlaxoSmithKline (GSK) were today's noteworthy downgrades:

• Rodman & Renshaw downgraded Bioenvision to Market Perform from Outperform, as the firm expects the majority of shareholders to vote in favor of Genzyme Corp.'s (NASDAQ: GENZ) acquisition, but does not believe the transaction price reflects the true value of the company.
• Bioenvision Inc. (NASDAQ: BIVN) was also downgraded at UBS to Neutral from Buy due to the acquisition.
• Archstone-Smith Trust (NYSE: ASN) was downgraded to Hold from Buy at Stifel Nicolaus, to Market Perform from Outperform at Wachovia and to Market Perform from Outperform at Friedman Billings following the acquisition by Tishman Speyer and Lehman Brothers Holdings Inc. (NYSE: LEH).
• GlaxoSmithKline (NYSE: GSK) was downgraded to Sell from Neutral at Merrill Lynch to reflect an unattractive risk/reward profile as they believe Avandia sales will be negatively impacted by the safety concerns raised in the New England Journal of Medicine.

OTHER DOWNGRADES:

• Clayton Holdings Inc. (NASDAQ: CLAY) was downgraded to Market Outperform from Strong Buy at JMP Securities, as the firm believes a 2H07 recovery in the subprime MBS market is becoming less visible.
• CDW Corp (NASDAQ: CDWC) was downgraded to Peer Perform from Outperform at Bear Stearns following the acquisition by Madison Dearborn Partners.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Stock futures dropped this morning indicating a possible lower start for U.S. stocks after Chinese stocks plunged 6.5% overnight.

Yesterday, stocks got a lift from M&A activity, but today, a sharp sell-off in Chinese stocks could take U.S. stocks down. Chinese stocks plunged after the government tripled the "stamp tax" on stock trades, trying to cool down the booming stock market. The Shanghai Composite Index tumbled 6.5% after hitting a record high on Tuesday. The Shenzhen Composite Index closed with a 7.2% loss. Economists say this shouldn't affect China economy as growth is mostly export driven.

Analysts have been expecting a correction in Chinese stocks due to the sharp price rise. Even Alan Greenspan quipped as much last week. European stocks fell the most in two months as fears this would spark yet another global sell-off similar to the one in late February. But the declines in global markets declined did not reach the same magnitude: The Nikkei 225 closed down 0.5% in Tokyo, the FTSE 100 declined 1.1% in London, Germany's DAX index was down 1.%, and France's CAC-40 was down 0.9%.

Today, investors will also pay attention to the Fed minutes release (at 2 p.m.) after it last kept rates unchanged, stating inflation remained a priority. The minutes could reveal more into policy makers future intention and investors will scrutinize the wording to see any implied intentions.

Oil prices rose today, ahead of U.S. inventory data (10 a.m.). While the report is expected to show an increase in crude and gasoline supplies, geopolitical concerns increased, especially worries about disruptions in Nigeria resurfaced.

Corporate news:

CDW Corp. (NASDAQ: CDWC) said yesterday that it had agreed to be acquired by a private equity company, Chicago's Madison Dearborn Partners LLC, in a $7.3 billion deal. CDW shareholders will receive $87.75 in cash for each share of common stock, which is a 16.1% premium over the company's Friday closing price.

IntercontinentalExchange Inc. (NYSE: ICE) may have helped its hostile bid for CBOT Holdings (NYSE: BOT) by reaching an agreement aimed at resolving a dispute between CBOT and the Chicago Board Options Exchange (NYSE: CME), The Wall Street Journal reported.

Viacom Inc. (NYSE: VIA) agreed to sell its Famous Music publishing business to Sony/ATV Music Publishing for about $370 million, the Wall Street Journal.

MAJOR PAPERS:

• The Wall Street Journal reported that CDW Corporation (NASDAQ: CDWC), a $6B market cap technology retailer, is being hotly pursued by a number of private equity firms including Madison Dearborn Partners.
• Avaya Inc (NYSE: AV), a telecommunications equipment maker, is said to be interested in selling all or part of the company, and is in talks with private equity firms and strategically interested companies, the Wall Street Journal also reported.

OTHER PAPERS:

• Dr. Ronald Krall, the medical director for GlaxoSmithKline plc (NYSE: GSK) told the New York Times that some of the 4,450 patients enrolled in the drug trial for Avandia have dropped out due to safety concerns
• Norsk Hydro ASA (NYSE: NHY) is looking at the possibility of making an offer for Canadian aluminum producer Alcan Inc (NYSE: AL), Globe and Mail reported.
• The Sydney Morning Herald reported that mining company Rio Tinto plc (NYSE: RTP) has hired Deutsche Bank AG (NYSE: DB) to advise it on a possible bid for Alcan.

WEBSITES:

• According to a report from Chinese-language Commercial Times and noted in DigiTimes, Quanta Computer has reportedly received an order for five million iPhones from Apple Inc (NASDAQ: AAPL) and that the 2nd generation device will offer "a different outer design to fit different markets."

So, you represent a big outfit in need of specially configured computer systems and on-site services. Who you gonna call? For many, the answer is a Vernon Hills, Illinois firm that offers the products of virtually all the big name manufacturers.

CDW Corporation (NASDAQ: CDWC) is a technology retailer, providing more than 100,000 computer hardware, software and accessory items through catalogs, telesales and company Web sites. It features product lines from such leading manufacturers as Apple (NASDAQ: AAPL), Cisco Systems (NASDAQ: CSCO), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE). The firm also arranges for system configuration, license management and on-site services. Customers are primarily businesses, government entities and educational institutions.

The company pleased investors last week, when it announced that it expected Q1 revenues of $1.859 billion. That topped the consensus Street estimate of $1.79 billion. Management also pointed out that average daily sales in March rose 24.6% (yr/yr) to $31.6 million.

MAJOR PAPERS:

• The Financial Times (subscription required) reported that General Motors Corporation's (NYSE: GM) CEO Rick Wagoner expressed caution about the possibility of General Motors adding new brands or US manufacturing plants to its portfolio, remarks that are likely to quash expectations of an imminent GM bid for cross-town rival DaimlerChrysler AG (NYSE: DCX).
• According to the Financial Times, Nikko Cordial's largest investor has rejected Citigroup Inc's (NYSE: C) $11B takeover bid.
• Also in the Financial Times, 3M Corporation (NYSE: MMM) has filed infringement lawsuits against Sony Corporation (NYSE: SNE) and Lenovo (LNVGY), and others, including Hitachi Ltd ADR (NYSE: HIT), CDW Corporation (NASDAQ: CDWC) and Matsushita Electric Industrial Co Ltd (NYSE: MC).

OTHER PAPERS:

• India's Economic Times reported that Wipro Ltd ADS (NYSE: WIT) is said to be close to acquiring an unnamed U.S. aerospace services company for about $90M.
• According to the U.K. Times, Procter & Gamble Company (NYSE: PG) has said it is willing to team up with private equity firms to pursue deals.