Private equity is about continuous dealmaking. But, with the wrenching credit crunch, activity has been horrible.

So, what to do? Interestingly enough, it looks like some of the top private equity operators are signing up for board duties.

Look at GM, which last week announced five new members to its board. In fact, three of them are from major private equity firms: The Carlyle Group's Daniel Akerson, S. J. Girsky & Co.'s Stephen Girsky, and TPG's David Bonderman.

It was just a couple of weeks ago that BusinessWeek reported on Micron Technology Inc.'s (NASDAQ: MU) effort to diversify with an acquisition of DisplayTech, a producer of display screens such as those used as viewfinders for digital cameras. Micron, one of the largest memory chip makers in the semiconductor industry, has been reporting losses over the past two years due to steep declines in the price of computer memory.

DisplayTech has been developing a new technology called "pico projection," which can produce crisp images from small devices. This innovation could make it possible to deliver a business presentation from a BlackBerry without having to lug along a laptop and full-sized projector.

Over the past five years, TPG has raised a whopping $52.35 billion for its private equity funds, making the firm the biggest player in the space.

True, last year was particularly tough for TPG, which suffered some horrendous deals (such as the wipeout on Washington Mutual). But the firm has shown that -- over the long term -- it can find ways to morph itself and ultimately produce competitive returns.

And this time, TPG is making some interesting moves. For example, the firm is highly averse to leverage buyouts (LBOs). Essentially, this is a way to use large amounts of debt to buy a company. However, with the credit squeeze, it's hard to make these deals work.

Back in the 1990s, the founder of TPG, David Bonderman, sold once-troubled American Savings Bank to Washington Mutual, Inc. (NYSE: WM) for a big profit. In addition to the big bucks, he was rewarded with a seat on the board. So when Bonderman structured a $7 billion capital raise for the company in April, it seemed like a sign that the smart money had some keen insight, right?

However, in today's wacky market, nothing seems to work out. TPG's investment price was $8.75 per share. Keep in mind that this was a 33% discount to the current market price (there were also warrants to purchase 57.1 million more shares at $10.06 each).

What's more, TPG was savvy enough to negotiate a juicy anti-dilution clause; that is, if Wamu's stock price fell, the fund would get more shares.

The problem: with the current plunge in Wamu's stock to $2.12 per share, there will be a deluge of more shares to hit the market.

Well, according to a piece in The New York Times, it looks like TPG is going to forgo the antidilution clause -- assuming the company needs to raise more capital, which seems like a good bet. Unfortunately, this is yet another sign of the rapid deterioration of the financial sector – and how the so-called "smart money" can get things very wrong.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He is also the founder of BizEquity, a valuation website

Lately, there have been signs that private equity powerhouses are getting push back from investors. Look at the Blackstone Group LP (NYSE: BX). In the raise of its latest fund, California State Teachers' Retirement System (Calstrs) invested a mere $250 million. Keep in mind that the pension invested $1.7 billion in Blackstone's prior fund.

However, not all private equity operators are having trouble. Take TPG Capital. The firm is apparently in the process of scooping up $30 billion (this is according to The Wall Street Journal). In fact, about $20 billion will be allocated to TPG's leveraged buyout fund. Who said buyouts are dead?

So why the optimism? Part of it is timing. After all, TPG started its capital raising process earlier.

Another key reason is that TPG has a stunning track record. Since 1985, the internal rate of return is roughly 55% (yep, this is something to get investors excited about).

Famed studio MGM, which is owned by a bunch of companies including Texas Pacific Group, Providence Equity Partners, Sony (NYSE: SNE) and Comcast (NYSE: CMCSA), is considering a public offering as it looks to deal with its $3.1 billion debt load. The company has hired Goldman Sachs (NYSE: GS) to explore options for a way out of the 2005 buyout that left the company over-leveraged.

Studios have slowed production because of the credit crunch that is making financing films harder than it's been in a long time.

Other possible alternatives include a bond offering or some other form of debt refinancing, but the company says it's not for sale, although it remains coy on that topic, saying that that "there is no 'asking price' for the company."

Is that a veiled invitation for bids? Sounds like it. But in this environment, there might not be many takers. Time Warner (NYSE: TWX) made an unsuccessful bid back in 2004, but most the other interested parties ended up walking away with various sized stakes in the company.

TPG is causing some consternation in the UK. You see, the private equity firm has agreed to invest £179 million in Bradford & Bingley (B&B), a beleaguered financial institution.

Essentially, B&B investors are worried that TPG has structured an airtight deal to prevent other bidders from coming to the table. Another concern is an anti-dilution clause which protects TPG if B&B's stock price falls.

Shareholders will vote on the deal on July 7th. So yes, there should be some drama.

And TPG isn't taking any risks. Actually, the firm plans to go on a major roadshow with investors. I'm sure it will be intense – but also helpful.

However, it looks like B&B is in a tough spot. In light of the deterioration of its business, the firm needs to work fast. And if the TPG deal falls through, it's a good bet that B&B's stock price will go into a tailspin.

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.

Last year, the Chinese government invested a cool $3 billion into The Blackstone Group LLP (NYSE: BX). It was before the IPO and seemed to be a good bet.

Of course, it wasn't. Shares of Blackstone have plunged since.

Despite this, China is still hungry for private equity. In fact, according to a report in the Financial Times, the State Administration of Foreign Exchange of China has agreed to invest $2.5 billion in TPG's latest fund (which may reach as much as $20 billion).

Simply put, China is overflowing with cash, so why not seek out higher returns?

True, private equity is ailing right now, but then again, the investment horizon is for the long-term. And with lower valuations, private equity firms are positioned nicely to pick up some attractive buyouts.

Something else: TPG has a strong track record. And by all accounts the firm is continuing its winning ways, such as with its latest score in selling Alltel to Verizon Wireless, a joint venture of Verizon (NYSE: VZ) and Vodafone (NYSE: VOD).

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.

According to a fresh report out of CNBC's David Faber, Alltel may soon be acquired by Verizon Communications Inc. (NYSE: VZ). Faber just noted that the companies are in advanced talks to acquire the current private equity held telecom operator by TPG and GSCP, which are Texas Pacific Group and Goldman Sachs Capital Partners.

Alltel went private last year and has somewhere in the vicinity of 13 million wireless subscribers. The value of that deal was in the 427 to $27.5 billion range, and interestingly enough this new deal may not be at any or at much of a premium to that price.

If there is any company that can acquire this and not have all the credit rating issues and not run into multiple bank debt issues like private equity, then it is Verizon. There are a couple of other players like AT&T (NYSE: T) or some foreign-owned carriers that could swing it too.

Read more about the full implications for the sector and which other companies might be affected by this deal at 247WallSt.com.

This week, private equity powerhouse, TPG, agreed to invest $353 million for a 23% equity stake in Bradford & Bingley Plc., an ailing UK mortgage broker. In fact, it looks like this deal could be a beachhead for many more transactions in the UK financial services sector (this is according to a piece in the Telegraph).

Europe also binged on credit over the past few years, and things are starting to crack. In other words, there will be a big need for capital infusions to shore up balance sheets.

A variety of financial services companies in the UK are selling at distressed levels (that is, large discounts to book values). For example, mortgage player, Paragon, trades at a third of its book value. No doubt, there are rumors that the company is attracting private equity interest.

Of course, TPG is not the only firm licking its chops. It looks like The Blackstone Group LP (NYSE: BX), JC Flowers and KKR are also prepping for some deals.

Besides Paragon, it appears that Alliance & Leicester and Northern Rock are in play for private equity deals.

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.

Back in the 1980s, David Bonderman was the chief dealmaker for Robert Bass, a Texan billionaire. He helped to structure the $550 million buyout of American Savings and Loan Association of California, which was caught in the S&L morass. It was a complex deal, requiring lots of negotiations with federal regulators. But it ultimately turned out to be a great investment. In fact, the bank became a vehicle to finance other deals.

Well, Bonderman is coming back to the future. Now, as the chief of TPG, he's one of the top players in private equity. And he wants to do some finance deals. To this end, he's raising $7 billion for a financial service fund. The investments will range from minority stakes to control situations.

Actually, Bonderman has already been busy with bank deals. For example, he recently assembled the $7 billion equity infusion for Washington Mutual (NYSE: WM). He also approached Merrill Lynch (NYSE: MER) to do an investment, which, so far, hasn't gone anywhere.

Yet, there are many financial institutions that need cash. Moreover, having TPG as a partner is usually a good thing.

As should be no surprise, it looks like TPG is getting traction on the capital raise, with commitments from the New Jersey State Investment Council and the government of Singapore.

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.

A new capital raise may have set a record, or at least close to it. Tygris Commercial Finance Group, Inc. has launched a new commercial finance company for middle markets transactions, and it says in the launch release that its funding is over $1.75 billion in equity commitments. Tygris says this is the largest initial capital raise ever in the U.S. commercial finance sector. Tygris will initially have offices in Chicago, Stamford, CT and Parsippany, NJ.

Tygris was founded by Aquiline Capital Partners LLC ("Aquiline"), a New York based private equity firm specializing in financial services, with New Mountain Capital, L.L.C. and TPG Capital joining as lead investors.

The company also claims to have established significant relationships with financial institutions including Deutsche Bank, Credit Suisse, SunTrust Robinson Humphrey, Barclays, Wachovia and Wells Fargo Foothill. With the backers and management team here on this, this seems like it is easily within the realm of contacts.

The Company initially will concentrate on developing leading franchise positions in three commercial finance businesses: middle market corporate finance, middle market equipment leasing and asset finance, and small ticket leasing.

Below is the management team, and unless I am missing something it looks like an impressive list of executives:

• Frederick E. "Rick" Wolfert, former Vice Chairman of Commercial Finance of the CIT Group and President of Heller Financial Inc., is the Company's CEO.
• Steven F. Kluger, EVP, Capital Markets and Corporate Strategy; former President/CEO of GE Capital Markets.
• Stuart A. Armstrong, President of Corporate Finance; former President/CEO of Black Diamond Commercial Finance, former Senior Managing Director and Head of Corporate Lending's vertical industry financing groups at GE Commercial Finance.
• Laird M. Boulden, President of Asset Finance (Chicago); former President/CEO of RBS Asset Finance, and President/co-founder of the Commercial Equipment Finance Group for Heller Financial Inc.
• Tim J. Eichenlaub, EVP, Chief Risk Officer; former Senior Managing Director and Group Head for CIT's Sponsor Finance business.
• T. Doug Hollowell, EVP, General Counsel and Head of Depository Strategy; former Executive Director at Morgan Stanley Corporate Treasury, and General Counsel at Merrill Lynch Capital.

A report inthe Financial Times says that Merrill Lynch & Co. Inc. (NYSE: MER) is holding talks with TPG about forming closer ties. This may include the possibility of the private equity firm investing in Merrill Lynch if the investment bank needs more capital. John Thain met with key executives from TPG according to the report.

The companies have apparently been in discussions since last fall. One affiliate had offered to put in as much as $3 billion into Merrill Lynch. Merrill Lynch raised some $12+ billion in funds elsewhere for different terms.

What is interesting here is that the article notes that TPG doesn't want to appear too close to Merrill Lynch, because of the appearance of being too close to a competitor.

The company has also raised additional funds this month by selling fixed income and preferred securities.

John Thain's suspenders and belt might be a little tighter since he went on record saying Merrill Lynch will not need any more capital.

A recent article out of The Economist that was featured on CFO.com this morning, "The Comeback of Private Equity," discusses that private equity firms could be an uncertain remedy for the credit crunch.

The private equity industry possesses two main characteristics as of late. First, huge leveraged buyouts are being replaced with purchases at distressed prices with less leverage. The second private equity factor lies in the fact that these companies have a lot of cash and capital to spend. With all this capital and all the distressed debt, private equity firms can buy loads of debt at low prices.

TPG has just gone after a major finance deal and The Carlyle Group recently closed a $1.4 billion fund that capitalized on low prices. TPG, Blackstone and Apollo are currently negotiating with Citi to pick up $12 billion in frozen loan off their balance sheet. Yet another example-Apollo, a firm with a historical focus on distressed debt, plans to go public.

While this shift in the market may help alleviate some of the credit crisis and earn private equity some returns, the jury is still out. Some regulators are wary of this new trend in private equity, wondering who will run the banks.

The article also points out that the true value of a private equity firm depends on its ability to improve portfolio company performance, not in "working magic" for financial institutions.

While I agree on the verdict still being out, this is actually a relief to see. Frankly, the cash has to be put somewhere and the good news is the debt markets have thrown out the baby with the bathwater. There will be real winners and real losers in this. There always are. But this will kick back a steady flow of funds or will at some point, and those funds will either be paid to partner/client groups or will be used to fund investments when a better climate is present. We won't be seeing any major club deals like we used to for $10 billion and $20 billion or more.

Someone has to act as a vulture. The issue always boils down to "at what price is this worth the risk?".

Citigroup (NYSE: C) would like to get a number of troubled loans off its balance sheet before its reports earnings. Accordingly, it is close to selling $12 billion in leveraged loans and bonds to private equity firms Apollo Management, Blackstone (NYSE: BX) and TPG. The debt would be sold at "an average price slightly below 90 cents on the dollar," according to Reuters.

Citi has, by its own calculation, about $43 billion of these loans on its balance sheet. It is anxious to get rid of as much of the exposure as possible. But the potential deal raises a point. If the haircut on the loans is only 10% and the smartest equity firms in the world want the paper, why is Citi so anxious to sell it?

The answer is panic. At this point American banks are taking so much risk off of their balance sheets that some assets, which are only modestly impaired, are being sold along with those which have relatively low inherent value.

In Citi's haste to solve its problems, the baby may be exiting with the bathwater.

Douglas A. McIntyre is an editor at 247walls.com.