Taking over an airline is always difficult. Besides dealing with a tough business, there is also the politics.

In the case of the $9 billion buyout for Qantas Airways Ltd. (ASX:QAN), the buyers, including Texas Pacific Group, were able to get buy-in from the necessary governmental authorities.

That looked like it would be the biggest hurdle, right?

Maybe not. According to a story in The Age, there are still some more issues.

A big shareholder -- Balanced Equity Management -- basically wants a higher price. And why not? Equity in Australia has been red hot.

It's a gutsy strategy, though. If the deal falls through, Qantas shares are probably going to be lower than current levels. Keep in mind that there are a lot of hedge funds in the stock and they may dump their shares if the deal implodes. In fact, on the recent news, the stock price of Qantas fell 3%.

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

It must be something in the water, but Blackstone Group LP's workers produce nine times the profit as their counterparts at Goldman Sachs Group Inc. (NYSE:GS), according to an analysis by Bloomberg News.

Blackstone's 770 workers produced an average of $2.95 million in net income last year compared with $360,000 at Goldman Sachs which has about 31,000 workers, Bloomberg says. This raises some interesting questions about how the market will value the New York-based hedge fund company.

If investors value it like Goldman, it will trade at about 10 times earnings with a market capitalization of $23 billion while a Fortress Investment Group LLC (NYSE:FIG) multiple would value Blackstone at about $29 billion, Bloomberg News says. Goldman's market capitalization is $87 billion and Fortess Investment Group's is $37 billion.

Blackstone, though, will trade at a premium to both companies -- at least at first -- because its performance has been amazing over the past few years.

Texas Pacific Group's (TPG) David Bonderman and KKR's Henry Kravis got a civic lesson yesterday. These buyout wizards met with the Texas House Committee on Regulated Industries on the issue of TXU (NYSE:TXU). Four proposed board members of TXU were there too: Don Evans, former U.S. Secretary of Commerce; James Huffines, Chairman of Plains National Bank Central Region; Ambassador Lyndon Olson, a former member of the Texas Legislature; and William Reilly, former Administrator of the U.S. Environmental Protection Agency.

The message: don't pass legislation that would require a regulatory review of the mega deal.

Hey, but don't politicians like to intervene -- especially when it concerns what consumers may ultimately pay?

Definitely. And it does look like the legislation is getting traction.

This does not mean the deal is doomed. Basically, it looks like TPG and KKR will need to make even more concessions, such as selling off assets and not piling debt on the regulated business units. TXU will also need to report its quarterly filings to the SEC.

The big problem is that the legislation will probably delay the process even more. And that's why TXU's stock has been lagging.

While the buyout offer is $69.25, TXU's stock is currently trading at $63.90.

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

Over the past few months, there has been a ton of takeover talk about Palm Inc. (NASDAQ: PALM). The company is certainly attractive. It has lots of cash and a strong global footprint. Today there was a report in Unstrung that says a deal could be wrapped up this week.

The buyers may actually be two major private equity firms: Texas Pacific Group and Silver Lake Partners. Of course, Palm would be a nice fit for a strategic party like Motorola Inc. (NYSE: MOT) or Nokia Corp. (NYSE: NOK). In fact, a deal with Motorola may actually quell some of the ardor of its big shareholder, Carl Icahn.

To add even more drama, Palm is going to report its earnings on the 22nd. Unstrung says the offer for Palm is likely to be above $20. And, given all the suitors, I think a high price is likely. Currently, Palm is trading at $19.01.

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

Airline acquisitions are always difficult, especially when some of the buyers are foreigners. That was the situation in the proposed $8.7 billion buyout of Qantas. One of the buyers includes the Texas Pacific Group.

In fact, Qantas is a crown jewel of Australia (a company that has posted profits for the past 13 years -- which is certainly a big feat for an airline). So, it would make sense that the regulatory approval would be quite difficult, right?

Well, according to the Wall Street Journal [a paid service], the Australian government granted approval to the deal. True, there are some conditions, such as keeping domestic routes and not off-shoring certain types of jobs.

But, for the most part, this looks like a done deal.

Basically, as private equity firms get bigger and bigger, they need to strike deals in foreign markets. However, many countries impose stiff barriers. For example, this is the case in Europe.

But, as for Australia, it looks like things are wide open for deal-making.

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

The TXU (NYSE: TXU) deal looks more like a political campaign, not a buyout.

That is, according to the Dallas Morning News, the private equity buyers – KKR and the Texas Pacific Group (TPG) – had some important meetings yesterday. For example, there was a get-together with the mayor of Dallas, Laura Miller. There was also a meeting with members of the Texas Business for Clean Air.

How did it go? Like any political situation, it's a bit complex.

Basically, it looks like the politicians are still skeptical – but they are still not saying "no."

Keep in mind that TXU has had a myriad of fights with political groups over the past couple years. Thus, it will definitely take some time to build trust.

Apparently, KKR and TPG are exploring the idea of bringing a Texas company into the deal. This could help ameliorate some of the concerns.

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

David Bonderman, the top man at private equity firm Texas Pacific Group, is pitching the idea of not proceeding with the construction of eight coal-fired power plants as part of his bid for TXU Corp (NYSE: TXU). Bonderman supposedly made the offer to appease environmental activists and hold off one potential obstacle to closing the deal.

However, is this Bonderman's environmental soft side or is it about making more money? By not proceeding with eight power plants, that is a lot of future supply of power that will not be available to the marketplace. Believe it or not, power consumption is a pretty good growth business, growing about 6% to 8%, if memory serves me correctly.

Bonderman has a long history of participating in environmental causes, serving on boards of the Grand Canyon Trust and the Wild Life Fund. However, one must question what will happen to power prices when a huge future supply of power is eliminated. It most likely means big green profits for Bonderman and Texas Pacific.

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.

Several years ago, I was a manager of a fund that provided bridge loans for companies. It was a pretty good business – but had its risks.

Here's how it worked: Occasionally, companies waiting for some large piece of financing need temporary financing to tie them over. My company provided these temporary loans at juicy interest rate levels and in exchange for some equity and lots of protection.

Well, according to a piece in the NY Times, it looks like bridge financing is making its way into buyout deals too. For example, there will be bridge financing for the massive buyout of TXU Corp. (NYSE: TXU). That is, a variety of banks will provide about $1 billion to the private equity firms KKR and Texas Pacific Group.

This type of financing, however, is not debt, but rather a form of equity called an equity bridge. In other words, if a deal implodes, it could be a big-time problem for the lenders. After all, in the event of a liquidation, the stockholders are last in line (which, in many cases, means getting $0).

Actually, equity bridges are not new. It was very popular during the late 1980s. Yes, that's about when the last buyout boom self-destructed.

As for the TXU equity bridge, the lenders include the following: JPMorgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS) and Citigroup Inc. (NYSE: C). Something to watch.

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

David Bonderman, a founding partner at the Texas Pacific Group, gave a speech at the Super Return 2007 conference today. Held in Germany, the get-together is a big-time event for the private equity crowd. Yes, all the big players are there.

But, wait, isn't Bonderman in the midst of the biggest deal ever; that is, the buyout of TXU (NYSE: TXU)?

That's true. Then again, the "show must go on." Besides, Bonderman has a strong team and I'm sure he's got the latest wireless gadgets to maintain contact.

OK, so what's his view on the TXU deal?

Well, he's usually outspoken, but he is keeping mum about TXU.

However, it should be no surprise that he thinks private equity is a good thing. It helps streamline businesses. It provides returns to investors. And, by the way, it's extremely lucrative for guys like Bonderman.

He also said – that despite all the media coverage – private equity is still a small part of the financial system. He called it a mere "rounding error."

So, he expects a lot more growth. And, the growth should spill-over into foreign markets.

You can get more on the topic from an article in Reuters.

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

While the deal for TXU (NYSE: TXU) has been in motion since January, it is clear that KKR and the Texas Pacific Group have been strategizing on this for some time. Then again, over the past few years, these firms have failed to buy public utilities. The key problem: Dealing with the state public utility commission (PUC).

Well, in the TXU deal, the regulatory headwinds actually look fairly manageable (you can find some information on this in TXU's investor presentation at the company's web site).

Perhaps the most critical advantage: There will be no need to get approval from the Texas Public Utilities Commission (TPUC). Yes, Texas can be a bit convoluted when it comes to the law and politics.

But, this does not mean the TPUC is defanged. In fact, the agency will certainly have a lot of power. After all, it rules on the kinds of rates TXU can charge. Then again, TXU was smart and is offering a 10% reduction.

In other words, so far, it looks like KKR and TPG have learned quite a bit from its previous forays.

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

One trend is obvious: with huge amounts of private equity, there should be a large number of mega deals.

But, something else is emerging: often, these mega deals involve regulated industries. Look at some of the recent transactions: Kinder Morgan, HCA, Harrah's Entertainment (NYSE: HET) and Univision.

And, now it looks like TXU Corporation (NYSE:TXU) is going to be announcing a buyout.

OK, so why the appeal? Well, first of all, big companies usually have lots of market power – and, as a result, tend to become the subject of new laws.

True, government regulation is costly. In some cases, the government may even put a cap on profits (such as with utilities).

But, then again, these are actually barriers to entry. Think anyone would be crazy enough to start a new electric utility?

This is important because to arrange a buyout requires taking on huge amounts of debt. Usually, this is a problem if new competition comes into the market and results in lower cash flows.

Thus, a core competency for private equity firms is having expertise in politics and government regulation. This is certainly the case with the Texas Pacific Group (TPG), which was one of the buyers for Harrah's and is rumored to be a buyer in TXU deal.

And, yes, one of the cofounders of TPG is a mastermind of regulatory issues. He has a law degree from Harvard and even studied Islamic law at the American University of Cairo. For a time, he was a law professor and then went on to work for the Justice Department. After this, he worked at the Washington DC firm law of Arnold & Porter.

No doubt, he probably never thought this would be great training for private equity.

Investors are awaiting the next mega deal. How about TXU Corporation (NYSE:TXU)? Such a deal would go for more than $32 billion (I think qualifies for "mega").

Well, that's the buzz – which got its spark from CNBC's M&A guru, David Faber. Apparently, the buyers are KKR and the Texas Pacific Group. The deal is supposed to be announced on Monday.

Founded in 1944, TXU is a major energy generation company. In fact, the company has been growing fairly nicely. In the latest quarterly report, earnings surged 77.7% to $1 billion. Yes, this company has a lot of cash flow to do a big-time deal.

Just a few years ago, the company was in tough shape. But current management has done a speculator job of turning things around. Part of TXU's business is regulated (that is, under utility laws). Then again, the Texas Pacific Group has a strong background in dealing with these matters. After all, one of its latest deals was the buyout of Harrah's Entertainment (NYSE: HET), which is also a heavily regulated company.

Wall Street certainly thinks a deal is near. In after market trading, TXU's stock surged 15.79% to $69.50.

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

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.

Recently, Burger King (NYSE: BKC) filed an S-1 with the Securities and Exchange Commission.

That is, the company's private equity investors – Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds (NYSE: GS) – are selling 20 million shares. There is also an option to sell three million more shares (assuming there is enough demand from public investors). Also, it should not be a surprise that Goldman Sachs is one of the underwriters on the deal.

According to a recent piece in TheDeal.com [a paid service], the Burger King buyout – which was completed in 2002 -- has certainly been lucrative. The return is about 4X so far.

Yet, the private equity investors will still have a hefty stake after the offering: 60.2%.

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