Lately, there's been lots of dire talk about the private equity world. Returns are likely to be much lower and perhaps there will be many firms that shut down.

Indeed, such things may turn out to be true.

However, whenever there is extreme turbulence and a pervasive credit crunch, there are also big opportunities to make money. Just look at Apollo Management and Cerberus Capital. Both firms made a killing during the rough early 1990s.

Fast forward to today, and we may be seeing something similar with one of the top beneficiaries possibly being Lone Star Funds. Yes, this week the fund purchased a collateralized debt portfolio from Merrill Lynch & Co. (NYSE: MER) at 22 cents on the dollar [subscription required]. The face value on it? About $30.6 billion.

This is not a one-off deal as it looks like Lone Star is hungry for high-risk debt. For example, the firm recently purchased the mortgage division of CIT Group Inc. (NYSE: CIT) and acquired Bear Stearn's mortgage segment. There was also the purchase of Accredited Home Lenders Holding Co. for $295 million.

Like many other financial institutions, investors are worried about the viability of CIT Group Inc. (NYSE: CIT), which is a major business lender. Of course, the stock price has plunged – and there are many rumors swirling.

But today, there was some good news. That is, CIT has struck $1.8 billion in deals to unload its manufactured housing/home loan units. The stock is up 16% to $7.93.

There were actually two buyers. First, private equity firm Lone Star Funds agreed to a $1.5 billion transaction for the home lending division. Next, Vanderbilt Mortgage and Finance will spend $300 million for the manufactured home segment.

These deals are certainly a big relief. Basically, CIT can now focus on its core business – and not deal with the headaches of the consumer area.

Actually, CIT has some big-time backing. For example, Goldman Sachs (NYSE: GS) recently made a $3 billion infusion.

Yet, there are still many challenges. After all, CIT has had difficulties generating profits and the credit crunch isn't going away.

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.

There is no holiday break for the rumor mill as word of many a company's activity is bantered about.



BUILD-A-BEAR WORKSHOP INC (NYSE: BBW)

As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.


COUNTRYWIDE FINANCIAL CORPORATION (NYSE: CFC)

It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.


THE STEAK N SHAKE COMPANY (NYSE: SNS)

Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.



STILL FLYING AROUND


WENDY'S INTERNATIONAL INC (NYSE: WEN)

They say they may want to sell the company, and the latest firm to gobble up shares is Tudor Investment, purchasing a 6.1% stake.


TD AMERITRADE HOLDING CORPORATION (NASDAQ: AMTD)

Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.



BUZZ


DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.