Since the early 1970s, the Apollo Group (NASDAQ: APOL) has transformed the private education business. The company not only has a broad network of campuses called the University of Phoenix, but also a thriving online education system.

As seen with yesterday's fiscal Q1 results, Apollo is continuing to grow at a nice clip. Net income increased 23% to $139.9 million, or $0.83 per share. Revenues were up 17% to $780.7 million.

Apollo got a boost from enrollments, which increased 11% to 325,000. But the company has also made important strides with student retention as well as the quality of the curriculum.

True, there are worries about the credit crunch. Just take a look at school loan provider Sallie Mae (NYSE: SLM), which plans to pull back somewhat. Yet, Apollo has anticipated some of this and has tried to reduce its reliance on private student lending.

Bloomberg News reports that private equity is on track for a record year of fees paid to Wall Street. LBO firms paid investment banks $8.4 billion during the first half of 2007, putting the buyout industry on pace to exceed 2006's $12.8 billion. If the current pace continues -- and that's a big if given the financing challenges they have been facing -- LBO firms would pay $16.8 billion to Wall Street by the end of 2007, a 31% increase over 2006.

Who's paying the fees? Here are the top four:

• Blackstone Group LP (NYSE: BX): $685.4 million
• KKR: $334.8 million
• Apollo Management: $407.5 million
• CVC Capital Partners Ltd.: $309.1 million

MOST NOTEWORTHY: Dominion Resources (D), Digene (DIGE) and Deutsche Bank (DB) were today's noteworthy downgrades:

• BMO Capital downgraded shares of Dominion Resources Inc. (NYSE: D) to Market Perform from Outperform citing the sale proceeds for its onshore U.S. E&P properties that were below expectations.
• Digene Corp. (NASDAQ: DIGE) was downgraded to Sell from Neutral at Ferris Baker Watts based on the acquisition by Qiagen (NASDAQ: QGEN). Digene was also downgraded at SummerStreet to Neutral from Buy, as the firm views the Qiagen's acquisition for $1.6B as reasonable.
• Deutsche Bank (NYSE: DB) was downgraded to Underweight from Neutral at JP Morgan, as the firm sees better value in traditional credit-exposed banks.

OTHER DOWNGRADES:

• Norsk Hydro (NYSE: NHY) and BP PLC (NYSE: BP) were downgraded to Hold from Buy at Citigroup.
• Quiksilver Inc. (NYSE: ZQK) was downgraded to Neutral from Outperform at Robert W Baird due to valuation.
  
• Banc of America downgraded shares of SunTrust Banks Inc. (NYSE: STI) to Neutral from Buy on valuation as they believe further sales of Coke may not be very accretive to EPS.
• LifePoint Hospitals Inc. (NASDAQ: LPNT) was downgraded to Hold from Buy at Jefferies based on valuation.
• Clear Channel Outdoors Holdings Inc. (NYSE: CCO) was downgraded to Hold from Buy at DBAB on valuation.
• Matrix USA downgraded shares of Apollo Group Inc. (NASDAQ: APOL) to Hold from Buy to reflect rising costs and lower enrollment rates.
• Matrix also downgraded True Religion Apparel Inc. (NASDAQ: TRLG) to Hold from Buy on valuation.

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

This week, Harrah's Entertainment (NYSE:HET) filed its proxy for its $17.1 billion buyout deal. The buyers include Texas Pacific Group and Apollo Management Group.

Clearly the big winner is Harrah's CEO, Gary Loveman, who will snag as much as $94 million if he gets the deal done. He even gets another $18.9 million if he leaves after the deal is closed.

Interestingly enough, before joining the company in 1998, Loveman was actually an Associate Professor at the Harvard University Graduate School of Business Administration.

Although, Harrah's will definitely need his brainpower to deal with the complex regulatory process. In the proxy filing, there are 12 pages that detail all the regulatory approvals that will be required.

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

Perhaps a sign of where the next bull market in real estate can be found, the famed private equity firm the Apollo Group announced that it would join forces with Indian firm Sun Group to form a 2 billion dollar fund to invest in Indian real estate. In recent months, six new companies gained listing on London's Alternative Investment Market for the purpose of investing in India.

Earlier this month, I wrote about the co-founder of the Caryle Group telling Maria Bartiromo that his fund planned to double its investment in Asia in 2007. With private equity money flowing into Asia so rapidly, I believe that those markets could be well-poised for a good showing this year.

After peaking at $98 a share in June 2004, Apollo Group' s stock has headed straight downhill and now trades at about $41.

After a great bull run that began in 1995, the industry began to mature and these stocks rolled over.

We blogged earlier today about how Pequot Capital's chief, Art Samberg, likes cotton. He also is looking for a turnaround in publicly traded education stocks. The stocks he likes are Apollo Group (NASDAQ: APOL), Career Education (NASDAQ: CECO) and Corinthian Colleges (NASDAQ: COCO).

Apollo has been putting a lot of money into its on-line community college program, Axia College, which it hopes can accelerate Apollo's growth rate. Management is hopeful Axia will be a feeding tube for its four-year on-line college, University of Phoenix.

Samberg also believes Career Education, which has been a real bloodbath, could be ripe for a turnaround under new management.

Publicly traded education stocks, as an industry, have stayed away from using leveraged balance sheets. Samberg notes that if current valuation persists and if fundamentals start improving, private equity firms could find these companies very attractive.

From Sunday to Tuesday, the private equity firm Apollo Group struck $37 billion in deals, buying Realogy and Harrah's. This is the subject of an excellent piece in today's New York Times.

The master of the universe at Apollo is Leon Black. And he is a veteran. During the 1980s, his mentor was Mike Milken. If you look back into the 1980s, Milken did some big deals in the casino industry (he was the key backer for gaming mogul Steve Wynn). So it makes sense that Apollo is gravitating to the gambling space with its big play for Harrah's.

Black has a knack for finding value. When the junk bond market imploded in the late 1980s, he was there to buy the gems. He is also has lots of experience with distressed companies and understanding the intricacies of bankruptcy.

If the boom in private equity deals falls apart (which seems inevitable), Black will probably know how to capitalize on that situation too.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.

Over the past few years, the stock price of Jacuzzi (NYSE: JJZ) has been stuck in a trading range of about $8 to $10. It has certainly been frustrating and, as a result, the company decided to go private – with the help of the private equity firm, Apollo Management LP.

The offer is for $12.50. Actually, this is still below Jacuzzi's 52-week high of $12.56. The total value of the deal comes to about $990 million -- which is actually a fairly small deal compared to recent blockbusters, such as HCA and Freescale.

Jacuzzi has been undergoing a restructuring, which is starting to show results. This should set the stage for a strong 2007.

Also, another big attraction is the company's brand. Actually, it was the Jacuzzi brothers who started the company in the early 1990s. And, over the years, the company has been able to acquire over 200 patents on its innovations.

In other words, there is stability with Jacuzzi, which is key with private equity. Basically, this looks like a pretty easy deal to get done.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

The rumor – reported by the Wall Street Journal – is true. Harrah's (NYSE: HET) is in play. According to a press release, two private equity firms -- Apollo Management and Texas Pacific Group – have made a buyout proposal to the company for $81 per share (all cash).

With billions rushing into private equity funds, it is inevitable to see huge deals. And the Harrah's offer certainly qualifies.

It also shows something else: private equity firms are not focusing only on brick-and-mortar companies. Now, it seems just about any kind of firm is a target.

True, the gambling business can be a cash cow. But it is also risky and competitive. And, in the case of Harrah's, the firm sports a whopping debt load of $10.2 billion.

Interestingly enough, over the past few years, Harrah's has bulked up. That is, the company purchased Caesars.

The company also has a bit of dot-com magic. That is, it has a sophisticated consumer database that helps to optimize gambling at its casinos.

It could also be a good deal for the Apollo Management and Texas Pacific Group. After all, Harrah's stock has been slipped badly this year. Even though the buyout offer is $81 per share, it is still below the 52-week high of $83.33.

Yet, the stock is currently trading about $76. In other words, investors are not betting on other bidders coming to the table.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.