Back in the 1980s, private equity maestro Ted Forstmann railed against the use of Mike Milken's junk bonds. He thought they were too risky and that the markets would eventually implode. He even wrote op-ed pieces in the Wall Street Journal (subscription only) about this. And, yes, he was eventually proved right.

Interesting enough, there's a piece in this week's WSJ that provides some warning bells for the current state of private equity. The author is Steven Rattner, who is the managing principal of Quadrangle Group LLC.

Like Forstmann, Rattner is very concerned about the high degree of leverage in Wall Street's dealmaking.

He points to the small yield spreads on junk bonds, the subprime meltdown, and easy terms (known as "covenant light" loans).

What's more, keep in mind that it's fairly common for private equity firms to pay out huge dividends so as to magnify returns. Of course, this means more and more debt.

Basically, the credit markets are not pricing risk properly. So, when things start to go sidewise, it could be a big shock to the financial system.

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

Ted Forstmann is a legend in the annals of private equity. Back in 1978, he started his firm Forstmann Little & Co. and went along to purchase companies like Gulfstream Aerospace, Dr. Pepper, Yankee Candle, General Instrument Corporation, and 24 Hour Fitness. Over his career, he has returned more than $15 billion of profits for his investors.

Back in 2004, he acquired IMG, a global talent agency. He even became the CEO of the company. Of course, a big part of the strategy has been mergers and acquisitions.

The latest deal is for Collegiate Licensing Company, which is the largest trademark licensing agency in the college marketplace. The terms of the deal were not disclosed (although, the rumor was that the price tag was about $100 million). As should be no surprise, colleges generate a ton from brands. Last year, the figure was $3 billion.

CLC has exclusive licensing rights to about 200 college properties, such as the Rose Bowl, Bowl Championship Series, the Rose Bowl, and even the Heisman Trophy.

With the resources of IMG, CLC should get a nice boost – and expand its revenue potential. Hey, international markets should provide growth for many years.

As for Forstmann, he still knows how to put a good deal together.

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