Betting on the outcome of a buyout is no easy feat. Will there be a heated auction? Or will the bidders have doubts and want price concessions?

The result is often much volatility. Just look at Beckman Coulter (BEC), a top medical diagnostic instruments company. In early December, the company put itself up for sale and the stock price surged to $72. Since then, the shares have traded in band of $71 to $75.

As the economy begins to gain some traction, we are starting to see more M&A activity. This is a good sign as it shows credit markets are thawing.

Today, we saw three key acquisition announcements.

BP (BP) is making a move to try and polish up its tarnished reputation by going green. BP announced it will be buying Verenium Corporation's (VRNM) cellulosic biofuels business-- fuels made from grasses, canes, softwoods and other biomass -- including the company's facilities in Jennings, LA and San Diego, CA for $98.3 million.

Even for top private equity firms, it's extremely tough to raise new funds. Investors are changing their allocations and also concerned about future returns. For example, private equity firms raised only $13 billion in Q1, which was the lowest since 2004. The peak came in Q1 of 2008, when the amount was roughly $68 billion.

As a result, private equity firms need to get creative, such as focusing on new markets.

A few years ago, SS&C Technologies had some bad timing. The company attempted to pull off an IPO. However, because of the global financial crisis, the offering had to be pulled.

Well, as the markets have since improved, SS&C Technologies is taking another try. This week, the company refiled for an IPO.

Up until the credit crisis, private equity firms had it made. They had plenty of leverage to play with and could load up their acquisition targets with it. So, they could realize a fantastic return on equity, mitigate their own risks, and show that they were the studs of the Street.

Then, all that went away. Credit markets dried up, and private equity companies lost their acquisition fuel. The numbers aren't as big as they used to be, but it looks like the private equity market is back in action.

Last year, a variety of Chinese dairy firms got embroiled in a major scandal. Some milk contained melamine, which resulted in the deaths of four infants. As a result, the Chinese government took swift action.

Now, it looks like the situation is getting much better. In fact, private equity firms are starting to invest in the sector.

The latest deal: The Carlyle Group has agreed to purchase a 17.3% equity stake in Yashili, which is one of the largest infant formula operators in China (the amount was not disclosed). The company got its start in the early 1980s.

According to the Wall Street Journal, China's government recently has pushed development of its local private-equity industry so that Chinese investors can get in on the country's private-equity deals. To that end, Chinese officials have tried to lure foreign money managers to raise funds from local investors.

Hong Kong-based First Eastern Investment Group, which plans to raise six billion yuan through a new wholly owned Shanghai subsidiary, and Asian brokerage CLSA Ltd., which plans to raise a 10 billion yuan fund through a joint-venture with state holding company Shanghai Guosheng Co., are just the latest to establish local-currency private-equity funds in Shanghai.

Private equity is about continuous dealmaking. But, with the wrenching credit crunch, activity has been horrible.

So, what to do? Interestingly enough, it looks like some of the top private equity operators are signing up for board duties.

Look at GM, which this week announced five new members to its board. In fact, three of them are from major private equity firms: The Carlyle Group's Daniel Akerson, S. J. Girsky & Co.'s Stephen Girsky and TPG's David Bonderman.

What's going on here? True, private equity has taken quite a few lumps over the past couple years. For example, Bonderman lost a bundle on his Washington Mutual transaction (which was one of the worst private equity deals in history).

The Carlyle Group, which is an $85 billion private equity powerhouse, recently published its annual report. It's a sobering document.

However, there are some interesting tidbits. For example, despite the financial turmoil -- where three deals went bust -- Carlyle was still able to raise $19.9 billion. What's more, the firm invested $12.6 billion in equity last year.

What about the future? Well, Carlyle's co-founder, David Rubenstein, who gave a presentation at the Aspen Global Leadership Network conference, offered some insight on what's ahead, according to BusinessWeek.

Not long ago, the private equity firm, Fortress Investment Group LLC (NYSE: FIG), appeared to be in deep trouble. But things are looking better now, as the stock price has gone from $1 to $4.65 this year.

In fact, Fortress is now pulling the trigger on some deals. Just this week, the firm teamed up with Crestview Partners LP and Lightyear Capital LLC to invest $450 million in First Southern Bancorp (Lightyear is operated by Donald Marron, who was the former chief of PaineWebber Group).

In order to end the two-year-old inquiry by New York Attorney General Andrew M. Cuomo into its pension business, the Carlyle Group has agreed to pay $20 million and make broad changes to its practices. Carlyle, one of the world's largest private equity firms, will no longer use intermediaries, known as placement agents, to secure investment business from public pension funds, and it will curb its campaign contributions to elected officials who oversee pension funds.

"This is a revolutionary agreement," Cuomo said Thursday. "I believe it totally changes the way people operate: It ends pay-to-play, it bans the selling of access, it puts the political power brokers out of business."

Like most other private equity firms, the Carlyle Group is in the process of cleaning things up. For example, the firm has taken write downs on funds, such as the Carlyle Partners IV platform. The fund was launched in the heyday of 2005, with $7.9 billion in assets.

But, at the same time, Carlyle is trying to find ways to capitalize on the low-valuation environment or even find growth opportunities. Just take a look at the latest fund: the Middle East and North Africa (MENA) fund, which has commitments of up to $500 million.

At the SuperReturn conference this week, some of the biggest players in private equity are giving their opinions on the market. For example, the Carlyle Group's David Rubenstein says there are some compelling values as in energy and even finance -- so long, of course, as the federal government is willing to pitch in some capital and provide a backstop.

However, don't expect the go-go days to come back any time soon. In fact, Rubenstein believes that the balance-of-power has shifted to major investors, such as pension funds and endowments. Essentially, they are going to require more discipline, transparency and lower fees. This is assuming that a private equity firm can raise any capital (after all, it's likely that the 2006-2007 vintage funds will sustain losses for some time).

In early December, the powerhouse private equity shop, the Carlyle Group, announced layoffs of 10% of its workforce. Let's face it, there's not much deal making lately.

Well, now it looks like another biggie in private equity is letting go of workers: the Blackstone Group LLP (NYSE: BX).

In all, the cuts are expected to come to 70 positions (the firm has about 1,300 employees), according to Bloomberg.com.

Back in November, Blackstone's chief, Stephen Schwarzman, was actually bullish on things. This was despite a terrible Q3, in which the firm reported losses of $502.5 million, or $0.44 per share.

For the most part, Schwarzman is eyeing some good deals (although, there has yet to be much activity). Also, he thinks there will be lots of growth in restructuring. In fact, General Motors (NYSE: GM) has hired Blackstone to help with restructuring options.

Despite all this, investors are quite skeptical of Blackstone. Simply put, the firm's portfolio write-downs do not seem to reflect the severe economic environment. Then again, Blackstone's shares have continued to languish.

As layoffs have spread across banking, investment banks and hedge funds, things have been fairly quiet for private equity firms. Then again, these operators tend to have small employee bases.

But, interestingly enough, we may be finally seeing some pink slips for the private equity folks. According to The Wall Street Journal, 3i will announce a 15% cut in its staff and that there will be a 19% cut at American Capital.

And now it looks like the tier-1 firms are not immune. The Carlyle Group is gutting 10% of its staff this week (which comes to about 100 people). There's not much deal-making to do right now. Besides, it looks like it will be tougher for private equity firms to raise new capital. If anything, the focus will be on trying to manage the existing portfolios.

What's more, Carlyle has had a variety of blunders. There was the implosion of its mortgage fund (Carlyle Capital) and the recent bankruptcy of its Hawaiian Telecom holding.

Of course, Carlyle is not alone. So, it's a good bet we'll start seeing more layoffs in the private equity world.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.