The market has made a nice rebound over the past few months, and one question is on every investor's lips: Can it continue?

To get an answer, it might not be a bad idea to look at what the private equity firms are planning. Remember when The Blackstone Group (NYSE: BX) decided to cash out with an IPO and it marked the exact top of the private equity boom? Take a look at how that stock has performed since then.

Well, now The Financial Times reports that "Kohlberg Kravis Roberts, the world's biggest buy-out group, is preparing up to six companies for initial public offerings worth billions of dollars, including Toys 'R Us, as it sells some of its most valuable groups back to the stock market."

The market has made a nice rebound over the past few months, and one question is on every investor's lips: Can it continue?

To get an answer, it might not be a bad idea to look at what the private equity firms are planning. Remember when The Blackstone Group (NYSE: BX) decided to cash out with an IPO and it marked the exact top of the private equity boom? Take a look at how that stock has performed since then.

Well, now The Financial Times reports that "Kohlberg Kravis Roberts, the world's biggest buy-out group, is preparing up to six companies for initial public offerings worth billions of dollars, including Toys 'R Us, as it sells some of its most valuable groups back to the stock market."

From 2004 to 2007, the titans of private equity tapped yield-hungry investors to raise massive amounts of buyout capital. Eager to deploy this easy money, they spent billions taking huge companies private, shattering records for mega-deals only to see them surpassed a few weeks later. The list of companies taken private includes many famous names: Toys 'R' Us, Hertz, Harrah's Entertainment, Tribune Co., and TXU, the Texas utility that set a record for buyouts in a deal worth over $44 billion.

Now many of those companies are staggering under the sheer weight of their debt. Bond investors, who once eagerly poured their money into the high-yield debt that made leveraged buyouts possible, have seen their holdings decimated. With the bonds that helped pay for some of the biggest private equity deals trading at less than 50 cents on the dollar, some worry whether the companies can stay afloat.

For details on eight big buyout targets that are now teetering on the brink, click through the following gallery.

With concerns that the Sallie Mae (NYSE: SLM) transaction may not close hitting the headlines as Congress returns to session ahead of next year's presidential election, could an opportunistic candidate turn national sentiment against a small, yet powerful, private equity group?

Sallie Mae was created to provide low-cost loans to U.S. students so they could afford a college education, mostly targeting those groups who could least afford it. While this mandate has lost its focus as Sallie Mae loans are no longer cheap, it does leave the opportunity for a smart politician to seize the moment: Why should the profits of government-backed debt for students go to JC Flowers, so they make billions in profits?

The same could be said about the recently completed buyout of HCA, the large hospital chain. by KKR, Bain Capital, and Merrill Lynch Global Private Equity. While it is a Class A operation, it generates a substantial portion of its revenue from Medicare and Medicaid. Once again, why should the U.S. taxpayer, who finances both Medicare and Medicaid, be paying money to HCA so they can pay down the $30-plus billion in debt so a few shareholders can walk away with billions?

It is interesting how one deal, Sallie Mae, could potentially raise so many red flags. As with most market excesses, one deal always become the poster-child deal symbolizing an era's end. Look for it to be Sallie Mae this time around. HD Supply renegotiating the terms for its deal could prove to be pure chump change.

There has been lots of private equity interest in the health care sector. Some of the notable deals include the buyouts of HCA and Triad.

The latest deal comes from the Texas Pacific Group (TPG). The firm has agreed to pay $945 million for the Surgery Division of HealthSouth Corp. (NYSE: HLS). The division has 139 outpatient surgery centers and three surgical hospitals across 35 states [revenues were not disclosed].

Interestingly enough, HLS will keep an equity sliver worth about $25 million to $30 million.

Basically, it's a sign that HLS sees potential in the division – but it also must deal with restructuring its operations. Might as well allow TPG to use its magic on the division, huh?

In fact, the deal will go a long way in paying down HLS's debt load.

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

Need to borrow $10 billion? Or how about $20 billion? No problem –- at least for some exclusive private equity firms, such as Blackstone and KKR.

Over the years, these firms have built tremendous franchises – as well as trust with lenders. They have undergone different market cycles and understand how to deal with deals that go sour.

But, there's a bonus lately; that is, interest rates are low.

A recent piece in Bloomberg.com takes a look at all this. For example, last year, KKR was part of the group that purchased HCA, a major hospital operator. Well, within three months of the deal, KKR was able to get a better loan at lower rates. Instead of paying 2.50% over LIBOR, the debt is now priced at 2.25%. That seems small , but this is for $12.8 billion in debt.

In fact, there have been about $64 billion in buyout refinancings this year (which exceeds the amount for all of 2006).

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

Yet again, Merrill Lynch & Co, Inc. (NYSE:MER) had a strong quarter, with net income surging 68% to $2.35 billion. There was strength in trading, asset management and of course, investment banking.

But there was another key source of income: investments in buyout deals. And, according to a recent piece in the Wall Street Journal [a paid service], it does pose serious risks.

True, it's lucrative. After all, Merrill also scores big fees on the private equity transactions. Yet, Merrill is making some big bets. For example, it shelled out $1.5 billion for its stake in HCA. This is a hospital chain that must deal with unpredictable government regulations. Also, the deal was done at a fairly high valuation.

So far, though, Merrill's private equity forays have been getting nice returns, especially with the Hertz Global Holdings, Inc. (NYSE:HTZ) deal. But there are many things that can go wrong: a botched deal; a credit crunch; a recession; a bear market.

Interestingly enough, back in the early 1990s, Merrill left the buyout business. Yes, it was because of some ill-conceived deals.

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

A recent piece in the Boston Globe has a insightful look at some of the ramifications of the flood of private equity deals. The author, Steven Syre, takes a look at the massive buyout of the Hospital Corporation of America, which is a hospital operator. The buyout price came to about $21 billion.

Of course, because of the deal, the company will need to load-up on debt, which means a lower credit rating. This is particularly bad news for existing bondholders of HCA. On the announcement of the deal, the bonds sunk about 15%.

And there's more bad news: the bonds will not be redeemed. Rather, they will be assumed by the private equity buyers.

Thus, before you buy some high quality bonds, you might want to think again – especially since big-time companies are now the targets of buyouts.

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

HCA, which is the biggest hospital company in the US, is going through the leverage buyout process. This means borrowing huge amounts of money – such as from banks and bond investors.

Well, it looks like there is little trouble raising the capital. Today, HCA was able to issue $5.7 billion in high-yield bonds.

Actually, keep in mind that "high-yield" has another name – ie, "junk bonds." These are bonds that have a relatively higher risk of default. In particular, the bonds have terms of 8 to 10 years. And, what do investors get? The yields range from 9.125% to 9.25%.

That's certainly better than what investors can get from the Treasury market.

Yet, there is definitely some risk. If HCA has trouble, so will the bonds. But, hey, that's for another day.

Something else: with the ease of the HCA financing shows there is lots of liquidity for buyout bonds. Actually, the next mega deal to get financing is Freescale, which will involve $9.4 billion in bonds.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Financial Statemet. He also has a blog at www.taulli.com.

It's been party times for private equity (PE) firms. Some of the funds are now reaching $10 billion to $15 billion in size, causing massive companies – like Harrah's and HCA – to become targets of PE firms.

Well, now Business Week has a cover story on it. The title says it all: "Gluttons at the Gate."

Essentially, PE firms have nifty techniques to extract cash from their portfolio companies:

• Advisory fees and management fees: these can easily be multi-million dollar paydays.
• Dividends: these may payback a large amount of the equity the PE firms invested in the target company.
• More debt: Hey, to pay a large dividend, a company usually needs to load-up the balance sheet with debt.
• IPO: file to go public and then sell shares to the public...and a slug of the cash goes to PE firms.

The huge growth in PE has a variety of factors: the low valuations because of the bear markets from 2000-2002, cheap debt, and lack of competition from strategic buyers.

However, there are now signs that PE is getting frothy. For this year, PE funds have raised about $159 billion. That is, these firms will probably be tempted to do low-quality deals – so as to put all this money to work. In other words, over the next couple years, there may be some blow-ups.

Already, though, some funds are sensing that there may be a backlash. For example, in a piece I did for BloggingStocks.com yesterday, Cerberus hired the former Secretary of Treasury to be its chairman.

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

Private equity, in my opinion, is the juiciest of all the financial sectors. While venture capital is more baldly a gamble -- after all, something like 10% of investments actually pay out handsomely -- private equity is a quieter, stuffier, much, much larger gamble. It makes my blood gurgle with excitement.

Private equity firms have been gambling big, of late, and, according to the Wall Street Journal [subscription required] at this wee hour of the morning, they might do even more so by orchestrating an LBO of Harrah's Entertainment, Inc. (NYSE:HET). Naturally, the biggie of all private equity gamblers, Texas Pacific Group, is rumored to be involved in the talks to buy out Harrah's, which has a $12.34 billion market value and $10.2 billion in debt. Now there's some leverage.

While this would certainly be the biggest casino company ever bought out by a private equity group, it wouldn't be the first casino company -- Colony Capital, also rumored to be in on discussions, has bought several properties in Atlantic City and Las Vegas -- or the first huge gamble. After all, there's HCA Inc. ($21.3 billion), in my mind (and I was analyst on many a hospital deal in my time in investment banking) a huge hospital management company like HCA is a huge gamble. In hospitals you have two very egocentric, impossible-to-predict, and money-hungry groups pulling your cash flow this way and that: doctors and the U.S. government. Ick.

Once upon a time, back in the late 1980s, management of RJR decided to buyout the company. It did not take long until other buyers came to the table – as the stock price soared. The deal eventually turned into history's biggest leverage buyout (LBO). The drama became a best-selling book, Barbarians at the Gate, as well as an HBO movie.

Could the same story be developing at HCA, which recently decided to an LBO? Well, according to a Wall Street Journal story, it appears that the Blackstone Group, which is a top private equity firm, is in the early stages of making a bid.

It would not be cheap. After all, it will need to top the existing offer of $21.3 billion. Even in the universe of master dealmakers, this is still a lot of dough.

Does this mean investors should buy HCA stock? Not really. Blackstone still needs to arrange financing, as well as bring other private equity firms to the table.

Besides, Wall Street pros are skeptical that a bidding war will break out, as the stock price is below the existing $51 offer.

I'm always leery to say "this time is different." But those who are running mega private equity firms are seasoned (such as Henry Kravis of KKR). Some still remember the excesses of the late 1980s and do not want to repeat them.

It's certainly good news for private equity firms, which are likely to get good deals on companies. But, as for public shareholders, they probably will not get nice premiums on these deals.

Recently, a variety of private equity groups have raised mega funds (over $10 billion). Well, such money is meant to be spent. And because of the large sums, it makes sense to target huge companies for buyouts.

And, we may be on the verge of the dealmaking. According to a Wall Street Journal story, HCA is at the late stages of negotiations to sell out for $21 billion. Apparently, the buyers include the private equity groups of Bain Capital, Kohlberg, Kravis Roberts & Co., and Merrill Lynch & Co.

Adding HCA's existing debt of $10.6, the transaction would actually have an enterprise value of $31.6 billion. This would set the record for the highest value for a private equity deal (the prior record holder was the RJR Nabisco deal in 1989).

Founded in 1968, HCA operates 182 hospitals and 94 surgery centers. The company has been weak lately – and so has the stock price. In other words, the private equity crowd sees this as a way to get a juicy deal. Something else: there are powerful long-term trends that should help HCA, such as the aging of the population and expected increased spending on healthcare.

Despite recent volatility in the equities markets, private equity appears to see this as an opportunity. And, with billions and billions in their coffers, they have the firepower to do a myriad of mega deals.