In the private equity world, a "flip" is a good thing. It means that you have made a ton of money in a short period of time.

And that's why investors put their money into these funds, right?

Well, in the $32 billion buyout of TXU (NYSE: TXU), things are a little more complicated. The private equity buyers -- KKR and the Texas Pacific Group (TPG) -- want to show that they are not greedy operators.

That's not an easy thing to do. Hey, look at Blackstone's $39 billion deal for Equity Office (EOP). A day after the firm bought the company, EOP began unloading assets.

But with TXU the politics will make this almost impossible. As a result, KKR and TPG have agreed that they will not unload the company for at least five years (this is according to The Wall Street Journal).

In the private equity world, this is a long time. But it may be too short for Texan politics.

Interestingly enough, it may not matter anyway. Because of recent initiatives in Texas, it looks like the TXU deal will face few regulatory hurdles anyway.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

There's an old saying in deal-making: "Buying a company is easy. The hard part is making it work once you own it."

That's the situation for Blackstone's star real estate guru, Jonathan Gray. He won the bidding for Equity Office Properties (NYSE: EOP), which cost about $39 billion.

For a deal like this, there is often a big party.But that's not what Gray did. Apparently, he is constantly scared that the deal will fail. After all, the last similar mega deal was the buyout of RJR Nabisco (back in 1989), which almost imploded.

Interestingly enough, while Gray was bidding for EOP, he was also planning and even negotiating the exit strategy. In fact, he is already unloading properties so as to pay down the enormous debt.

Moreover, he's a big-time Chicago Bears fan and despite having tickets to the Super Bowl, he instead opted to spend his time wheeling and dealing to get the EOP deal done.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The Blackstone buyout machine continues to find new targets. The latest is Pinnacle Foods Group.

True, this does not compare to the mega deal for Equity Office Properties (NYSE: EOP).

Nevertheless, the price tag still has ten digits: $2.2 billion (if you include the debt load).

Pinnacle is an amalgam of consumer brands, such as Vlasic, Duncan Hines and Swanson. In other words, it is a stable cash-flow business, which is what private equity firms love.

Blackstone is buying the company from a group of private equity firms, which have spent the last three years restructuring the company's operations.

At 12X EBITDA, the deal is not cheap. Pinnacle is thus likely to be a platform for further acquisitions.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Costco Wholesale (NASDAQ:COST), which has 23 million members, got a bullish take from Barron's last week.

Despite its large size, the company continues to grow nicely. Earnings are expected to increase at 10%+ annually and same-store sales continue to be strong.

Could Costco be a buyout candidate?

Perhaps. The company has a rock solid balance sheet, with $2 billion in cash. It also owns about 78% of its stores. This should make it easy to raise a lot of debt to get a deal done.

And with the high valuation of Equity Office Properties Trust (NYSE:EOP) buyout, there should be some interested buyers.

In the meantime, Costco still looks good as a standalone investment. Hey, even Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) owns 5 million shares.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

In 2006 global M&A volume set a new record of $4.1 trillion -- 21% over the previous high set in 2000. But according to Business Week, private equity's share of that merger market has fallen from its 2006 peak. The reason? Rising stock prices are forcing private equity firms to bow out of overpriced deals. And this is leaving the merger field more open to public companies (a.k.a. strategic buyers) who can use their increasingly valuable stock as currency even as rising interest rates cap the value of private equity firms' cash and debt.

Last August I wrote about some signs of private equity's topping out. And I'm scheduled to appear on CNBC's Morning Call at 10:20 a.m. on February 12th to debate whether private equity's role in M&A has peaked. Over the last decade, private equity's share of M&A transactions has averaged about 12%. But its M&A share has been rising in the last several years -- climbing to 18% in 2006.

However, so far in 2007 private equity's M&A share has tumbled, accounting for a mere 10% of announced transactions compared to all-stock transactions from strategic buyers which account for 25% of 2007's announced deals. While it's too early to be certain that private equity has peaked, five factors are tilting the playing field in favor of strategic buyers:

It's a good week for Sam Zell, who sold Equity Office Properties Trust (NYSE: EOP) for $39 billion. In all, he takes about $900 million. At age 65, he is certainly a veteran player of the real estate game.

One of his peers, Steven Roth – who is the CEO of Vornado Realty Trust (NYSE: VNO) – is 64 years old. He dropped out of the bidding for EOP because he thought the valuation was too rich.

And, today, another Old Guard real estate mogul, Mortimer Zuckerman, is taking money off the table. He is the chairman of Boston Properties Inc. (NYSE: BXP) and is 68 years old.

According to an SEC filing, he is selling roughly $75 million of his stock.

But, despite all of this, Blackstone's real estate chief, Jonathan Gray, was willing to buy EOP – which is likely to have a big impact on real estate valuations.

His age: 37.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The shareholder vote for Blackstone's $55.50 offer for Equity Office Properties Trust (NYSE: EOP) was overwhelming -- 92% in favor.

Now, Blackstone is the proud owner of 543 commercial properties.

But it will also mean raising $31.9 billion in debt. Keep in mind that EOP already has $16 billion in debt.

In fact, according to the Wall Street Journal, Blackstone has already negotiated deals to sell-off properties [subscription required].

Speed is critical. Currently, the commercial real estate market is hot and EOP has choice properties, such as in New York City.

Apparently, Blackstone's valuation on EOP is roughly 33.8X its cash flows. That is roughly double the average for the shares that trade on the Bloomberg Real Estate Investment Trust Index.

So, if your rent goes up, you can blame Blackstone.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

So, what do you do after you sell your real estate company for $39 billion? Buy the Tribune Co. (NYSE: TRB)?

Sam Zell, who is the CEO and co-founder of Equity Office Properties Trust (NYSE: EOP), has apparently made a proposal for the Tribune. The price was not disclosed.

No doubt, it's been tough for the Tribune to find a buyer. After all, the newspaper business continues to languish. And the future does not look good.

But, given Zell's masterful work in engineering the biggest buyout deal ever, he might also bring some magic to the Tribune, right?

Well, investors are not convinced. Tribune's stock is up only 7 cents to $31.02.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

In the bidding for Equity Office Properties Trust (NYSE: EOP), there are two offers. One is from Blackstone and it is all cash. The higher bid, which is a combination of cash and stock, is from Vornado Realty Trust (NYSE: VNO).

Last week, EOP's board rejected the Vornado offer. The board was not thrilled that it would take at least three months to close the deal.

But Vornado is now making an interesting tweak: that is, the company will pay its cash faster. This is according to the Wall Street Journal.

However, it will still likely take a month, because there will be a tender offer. And, of course, the equity payment will still take at least three months, because of approvals and filings.

All in all, it's not much of a change and is likely that the EOP board will reject this offer too. But what about EOP shareholders? What might they do in this week's vote? They may actually prefer Vornado's higher bid.

In other words, the move from Vornado does look particularly savvy -- and, in fact, could force Blackstone to increase its bid yet again.

EOP's current stock price is $55.24, which is above Blackstone's all-cash offer of $54.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Note: The Daily Option Update is provided by Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX down .22 to 10.09.

Cisco Systems Inc. (NASDAQ:CSCO) -- option volume heavy as February implied volatility bid up on hedges into EPS. Cisco, the largest vendor of data networking equipment and the leading global supplier of internet-working solutions is expected to report EPS on 2/6. Goldman Sachs says "we believe there is a high likelihood of Cisco beating our and the Street's estimates of $8.28 billion/$0.31. We expect management to reaffirm positive longer-term trends in emerging markets, new technologies, and the impact of video networks as key drivers of sustained double-digit top-line growth." Cisco call option volume of 73,135 contracts compares to put volume of 46,830 contracts. Cisco February option implied volatility of 42 is above its 26-week average of 28 according to Track Data, suggesting larger near term price risks.

Nabors Industries Ltd. (NYSE:NBR) -- option implied volatility and volume increases as NBR rallies. Nabors is an owner and operator of almost 600 land drilling, approximately 791 land workover/well-servicing rigs and 43 offshore platform rigs worldwide. Nabors will report EPS on 2/7. Nabors is recently up .80 to $31.02 on unconfirmed LBO chatter. Nabors call option volume of 26,680 contracts compares to put volume of 2,895 contracts. Nabors March option implied volatility is at 38. Nabors February option implied volatility of 53 is above a level of 43 from twenty-minutes ago and above its 26-week average of 33 according to Track Data, suggesting increasing price fluctuations.

Option volume leaders today were: Cisco (CSCO), Google Inc. (NASDAQ: GOOG), Equity Office Properties (NYSE:EOP), NYSE Group Inc. (NYSE: NYX) and Amazon.com Inc. (NASDAQ: AMZN).

Note: The Daily Option Update is provided by Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX down .14 to 10.28.

Amazon.com Inc. (NASDAQ:AMZN) - puts more active than calls as prices increase on purchase for Hedges. Amazon was trading up .71 to $38.38 around 2 p.m.. Amazon is expected to report EPS of $0.22 after the close. Lazard has a Hold rating on Amazon said on 1/31/07, "At current price levels, we believe the stock largely discounts strong growth, operating margins expansion, and improving free cash flow generation." Amazon call option volume of 43,043 contracts compares to put volume of 60,717 contracts. Amazon February option implied volatility of 58 is above its 26-week average of 39 according to Track Data, suggesting larger price fluctuations.

Neurochem Inc.'s (NASDAQ:NRMX) May option implied volatility keeps Climbing into Spring Risks. Neurochem issued a press release this morning indicating results from the first phase 3 study of NRMX's Alzhemed for the treatment of Alzheimer's disease is expected in the spring of 2007. Neurochem and partner Johnson & Johnson (NYSE:JNJ) have a PDUFA date for Kiacta for AA Amyloidosis on 4/16/07. Neurochem call option volume of 4,859 contracts compares to put volume of 5,129 contracts. Neurochem May call option implied volatility is at 152; puts are above 211 according to Track Data, indicating large price fluctuations. NRMX puts are expensive because Neurochem is difficult to borrow.

Option volume leaders today were: Altria Group Inc. (NYSE:MO), Google Inc. (NASDAQ:GOOG), Equity Office Properties Trust (NYSE:EOP), Bristol Meyers Squibb Co. (NYSE:BMY) and Sepracor Inc. (NASDAQ:SEPR).

On today's STOP TRADING segment on CNBC, Jim Cramer said the market is acting like it is immune to falling. Even subprime lenders, First Horizon National Corp. (NYSE:FHN) and Countrywide Financial Corp. (NYSE:CFC) are rising without a deal yet.

Cramer again talked about Illinois Tool Works Inc. (NYSE:ITW) and the Black & Decker Corp. (NYSE:BDK) showing and that the fact it is happening ahead of the Fed announcement tomorrow is a good indicator.

On natural gas being up 11% and crude up 8%, Cramer agreed with SunTrust's call to be in natural gas. SunTrust's picks are ATPG, BBG, BEXP, CHK, EOP, EPEX, ROSE. The one Cramer noted as the play in the area if you are a true believer is Grey Wolf Inc. (NYSE:GW).

We have seen a couple of pretty big names trading up to new 52 weeks in today's session.

The biggest jump on the day comes from MEMC Electronic Materials (NYSE: WFR) whose shares jumped an impressive 19.7% today to $52.21 and set a new 52 week high earlier in the session at $52.96 after reporting better than expected earnings last night. The company reported $0.68 per share which handily beat estimates of $0.59.

Grocery giant Kroger Co. (NYSE: KR) saw it's shares set a new high of $24.67 before finishing out the day up 1.8% to $24.51 up $0.44. No real news behind today's jump in this stock.

Clear Channel Communications (NYSE: CCU) hit a new 52 week high in early morning trading sold off for most of the afternoon as profit takers came into the market. After setting a new high up at $37.55 the stock closed down 0.5% on the day to $37.10 down $0.20. No real news out on this stock today.

The real estate trust giant Equity Office Properties Trust ( NYSE: EOP) also set a new high today. Shareholders watched their stock trade up to a new high of $55.25 before finishing out the session up 0.6% to $55.22 up $0.32. Yesterday the company announced that that it has amended its merger agreement entered into on November 19, 2006 with affiliates of The Blackstone Group. Under this amended agreement, Blackstone has increased offer price to acquire all outstanding common stock of Equity Office to $54 per share payable in cash from previously provided $48.50 price per share.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.

Volatility Index S&P 500 Options-VIX up 1.19 to 11.16.

Equity Office Properties Trust's (NYSE: EOP) volatility is at 15 into Blackstone raising bid to $54 cash. Equity Office Properties is recently trading at $54.66, suggesting a higher bid is expected from other groups. Equity Office Prop announced it has amended its merger agreement entered on 11/19/06 with Blackstone Group. Blackstone will acquire all of Equity Office Prop common stock for $54 a share in cash. A group led by Vornado Realty Trust (NYSE:VNO) had bid $52. Equity Office Properties' overall option implied volatility of 15 is near its 2-month average, according to Track Data.

Akamai Technologies' (NASDAQ: AKAM) February option implied volatility flat is at 50. Akamai will report EPS on 2/7/07. Akamai, a leading global service provider for accelerating content and business processes online, recently traded at $53.47. Deutsche Bank has a $59 price target on Akamai . Alex Brown said, "We expect Akamai to deliver a strong 4Q with potential upside to our estimates on strong internet retail sales during the holiday season." Akamai's February option implied volatility of 50 is near its 26-week average, according to Track Data, suggesting non-directional price fluctuations.

Option volume leaders today were: Google Inc. (NASDAQ: GOOG), Apple, Inc.(NASDAQ: AAPL), US Steel (NYSE: X), Microsoft Corp. (NASDAQ: MSFT) and eBay, Inc. (NASDAQ: EBAY).

Note: The Daily Option Update is provided by Options Specialist Paul Foster of Theflyonthewall.com.

As Wall Street expected, Blackstone Group made a counter offer for Equity Office Properties Trust (EOP). And it's a 11% higher than its original bid -- coming in at $22.3 billion.

The bid from Vornado Realty Trust is $21.5 billion.

Yes, Blackstone wants EOP in a bad way. And, given its newest offer, it looks like the firm will win this trophy.

What's more, the break-up fee will go from $200 million to $500 million. In other words, if Vornado wants to make another offer, it will certainly be expensive. What's more, the firm has a tight deadline -- January 31st -- to make a bid.

All in all, the co-founder and CEO of EOP, Sam Zell, has definitely shown he is a very skillful deal-maker. By initially establishing a low break-up fee, he created an auction environment. As a result, he's going to walk away with an even bigger fortune.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.