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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.

Harrah's Entertainment (NYSE: HET) closed yesterday at $87.12. HET accepted a $90 share bid from Apollo Management and Texas Pacific Group on December 19, 2006; the deal is expected to close soon. HET overall option implied volatility of 29 is above its 26-week average of 18 according to Track Data, suggesting larger price risks.

M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Despite all the rumors, the $24.7 billion buyout of Alltel (NYSE: AT) got done. With the credit crunch and botched deals, the stock definitely showed volatility. But, the private equity folks at Texas Pacific Group and Goldman Sachs (NYSE: GS) certainly didn't lose interest in the company. The stock price on the transaction was $71.50.

No doubt, Alltel made some key strategic moves to make itself attractive to private equity sponsors. Perhaps the most important initiative was the spin-off of its wireline business in 2006. Basically, this provided more focus for the company.

To get some more perspective on the deal, I checked out the proxy disclosures. Alltel took the approach of a quicker auction – so as to minimize leaks as well as try to get a better valuation.

Alltel had its financial advisors put together a summary LBO (leverage buyout) analysis. The estimates ranged from $59.75 to $70.50. This assumed that the company could fetch 6.5x to 8x multiples on EBITDA by 2012, which would produce a return ranging from 17.5% to 22.5% per year.

All in all, this looks like a textbook example of a quality deal. Yet, there are certainly risks. After all, Alltel will need to manage a debt load of $23 billion.

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 DealProfiles.com.

Chinese investors feel that they got burned when they took a stake in big private equity firm Blackstone (NYSE: BX). That IPO did not do well, so the disappointment is understandable.

But, the Chinese may be back. According to a report in the FT, the China Social Security fund, which manages over $62 billion in assets, has its eyes on KKR, Carlyle, and TPG. The fund is interested in a stake of 9.9% in at least one of the companies. The British newspaper quoted one analyst on the potential investment: "'China's interest in buying into overseas financial intermediaries is clearly part of a deliberate strategy,' said Isaac Meng, an analyst with BNP Paribas in Beijing. 'The government is hoping to do a better job in exporting its capital than the Japanese did in the 1980s.'"

That may all be well and good, but members of the US Congress are already concerned about the investment of China's Citic Securities in Bear Stearns (NYSE: BSC). It is unclear how such an investment would compromise US interests, but Congress could try to block these deals on the grounds that large investment and LBO firms control a huge portion of the investment capital in the US. They would not want any Chinese influence in the process.

The Congressional posturing on the matter is a red herring, but meddling by the federal government could simply make the Chinese wary of moving capital into the US. But, if Congress leaves the matter along, Wall Street firms are likely to have Chinese shareholders.

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

Yesterday's $11.5 billion debt offering for Energy Future Holdings, formerly known as TXU Inc, proceeded nicely considering the market turmoil of the last few weeks, according to TheDeal.com.

It's still just a small portion of the $36 billion commitment, but the discounts were smaller than expected. This must come as a relief to KKR and Texas Pacific Group, which launched the $44 billion buyout in February.

Does this mean the debt markets are recovering? Perhaps. Meanwhile, there's still a lot of debt to sell.

Ford (NYSE: F)'s negotiations with the UAW should be over soon. If it gets a deal that looks like the ones the union put together with Chrysler and General Motors (NYSE: GM), the No. 2 car company should have labor costs much closer to its Japanese rivals. It may have to put $20 billion into a health-care fund for the union, but the firm has almost twice that much cash on its balance sheet.

The New York Times has pointed out that the sale of Ford unit Jaguar is going much slower than expected. The paper says: "Ford's bidding date is now Oct. 30, a person involved in the process said Thursday. That is a month later than bidders originally thought they would be making offers." Several private equity firms -- including Cerberus Capital Management, Terra Firma, and Texas Pacific Group -- as well as India's Tata Motors are rumored to be interested in the British car company and another Ford unit, Rover.

But, taking a step back for a moment, Ford may not sell the Jaguar unit at all. The U.S. company may have needed the money if the UAW payment was going to be onerous. But, the funding of a union benefit plan now seems within Ford's means. It is entirely possible that the car units were being shopped in case Ford needed the money. Now, it does not.

Ford management should have a look at the fact that if a private equity firm can turn Jaguar around, then a big car company should be able to do just as well. If Ford can't get a premium price for Jag, it should not sell it.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Leap Wireless(NASDAQ:LEAP) implied volatility Elevated prior to PCS buyout proposal. LEAP, a provider of wireless communications services, is recently up $13.45 to $85.95 in pre-open trading. PCS proposed to acquire LEAP for about $5.27 billion in stock. LEAP total option volume of 801 contracts on 8/31 was below average. LEAP over all option implied volatility of 46 was above its 26-week average of 35 according to Track Data, suggesting larger price risk.

MetroPCS(NYSE:PCS) implied volatility elevated prior to stock bid for LEAP. PCS, a provider of unlimited wireless communications services, proposed to acquire LEAP for about $5.27 billion in stock. PCS option volume was light on 8/31/07 on 327 contractors. PCS over all option implied volatility of 68 is above its 16-week average of 50 according to Track Data, suggesting larger price risk.

TXU Corp(NYSE:TXU) volatility flat as Arbitrage spread tightens. TXU, manager of a portfolio of energy business in Texas, closed at $67.40. KKR & Texas Pacific Group announced in February the acquisition of TXU for $69.25. The deal is expected to close by year end. TXU October option implied volatility of 13 is near its 26-week average according to Track Data, suggesting non-directional risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

In another lap tray to the belly, customers of Milwaukee-based Midwest Air Group (NYSE: MEH), repeatedly named as one of the nation's best airlines for customer service and comfort, learned today that the airline will be purchased by a group led by TPG Capital. The investor group includes Midwest's competitor Northwest Airlines (NYSE: NWA), which is reviled by passengers for its cattle-car seating, lack of timeliness and failure to understand the concept of customer service

The acquisition offers little in the way of synergy to the two airlines. They duplicate many routes, and Midwest flies the Boing 717, while Northwest uses 747s and 757s. What the deal does accomplish is to block the expansion of a potential competitor in Northwest's upper midwest routes. While the deal secures the present management of Midwest, I suspect it's just a matter of time before the malaise reaches Milwaukee.

Midwest has been fighting off suitor Airtran Holdings' (NYSE: AAI) hostile takeover attempt, which reached $15.75 and $389 million before it folded its cards late last week. TPG, which grew out of the Continental Airlines (NYSE: CAL) takeover in 1993, is offering $16 per share, or over $400 million, to take the company private. The Midwest board voted Sunday to go forward with the TPG offer, and an agreement is expected by midweek.

With the potential for great riches, private equity has become a magnet for top-notch executives.

Take a look at TPG (Texas Pacific Group). Today, the firm announced that it has hired Kevin Rollins as a Senior Advisor.

Of course, his latest gig was as president and CEO of Dell Inc. (NASDAQ: DELL), where he spent 11 years. Before this, he was a partner and director at Bain & Co., a firm that has made lots of money providing strategic advice to private equity firms. In fact, the firm spun out Bain Capital in the 1980s, which has emerged as one of the largest private equity firms in the world.

As a Senior Advisor, Rollins will be kind of like a Bain consultant. Although, if there is a company that needs a veteran CEO, he may go back to being an operator.

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

Perhaps The Donald should assign some of his interns to price out the value of Trump Entertainment Resorts, Inc. (NASDAQ: TRMP). It seems, according to the Philadelphia Enquirer, that his asking price of $22 a share is double what the prospective buyer is willing to pay.

In an analysis that would deflate the ego of a lesser man, Bear Stearns (NYSE: BSC) recently placed a fair-market price of $11 on the stock, which is trading modestly above that level. Trump Entertainment Resorts, which owns casinos in Atlantic City, is thought to be very vulnerable to new gambling venues in development in New York and New Jersey. Earlier this month, CEO James Perry was forced out due to his lack of support for the rumored sale to Dennis Gomes and JEMB Realty Corp.

The disconnect between Trump's expectations and the market's valuation of the company has a couple of troubling aspects. Given the sweet deal Harrah's Entertainment recently penned with Apollo Management and Texas Pacific Group, Trump's paltry valuation makes even more obvious its shortcoming. And since the company hired Merrill Lynch & Co. (NYSE: MER) to help craft a deal, I have to wonder who is avoiding a reality check here.

Trump Entertainment is in a precarious position to turn down a legitimate offer, but the spread between the two positions could well prove as impenetrable as The Donald's coiffure.

Private equity giant The Blackstone Group (NYSE: BX) continued its slide Wednesday, dipping as low as $29.13 before finding its footing. At 2 p.m. Wednesday, shares of Blackstone were trading at $30.20, 1.79% below Tuesday's $30.75 closing and $0.20 under Wednesday's $30.40 opening price.

Quoted by The New York Times' DealBook, IPO Boutique managing director Scott Sweet suggested that small investors are already bailing out on their short-lived Blackstone holdings, noting the small blocks of Blackstone shares being sold off Tuesday.

Blackstone's sustained losses do nothing to quiet concerns about the shaky reign of private equity, underscored by ongoing Senate Finance Committee discussions on raising buyout firms' tax burden. But reports of its own IPO ambitions suggest The Carlyle Group is not discouraged by the fizzle that followed Blackstone's NYSE debut last Friday, when it gained $4.06 from its underwriters' $31-per-share IPO valuation. Blackstone gave back Friday's gains in just two days.

The Washington Post thinks the recently announced deal by Silver Lake Partners and Texas Pacific Group to take telecommunications equipment maker, Avaya, Inc. (NYSE: AV), private indicates a perilous decline in credit standards. And the Post thinks this decline will contribute to the end of the takeover boom.

I always feel a bit skeptical when I read these kinds of articles. It's not so much that the logic is flawed, but the timing is often hard to pin down. I am guilty of doing the same thing myself since I wrote something similar last August. And yet the takeover boom refuses to bend to the will of the pundits.

The Post believes there are three reasons why the takeover boom has peaked:

Since the early 1990s, the private equity firm Texas Pacific Group has built a great reputation with turnarounds. One marquee deal was Continental Airlines (NYSE: CAL). TPG has also been quite savvy with high-tech targets. For example, the firm is in the process of buying Avaya Inc. (NYSE: AV).

But it's not a complete cake-walk for TPG. Take a look at the firm's $560 million deal to buyout consumer electronics company JVC. The issue? Well, lenders are backing off. After all, interest rates have been rising.

What's more, JVC is still deteriorating. It is in a tough marketplace and must compete against biggies like Sony Corporation (ADR) (NYSE: SNE).

Even so, a deal still may get done -- but not necessarily with TPG. Rumor has it that Cerberus Capital may may be interested in JVC too.

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

The trend of private equity firms buying out high tech companies continues. According to Bloomberg News, Silver Lake Partners and TPG will take Avaya Inc. (NYSE: AV) private for $8.2 billion -- the biggest LBO of a computer networking firm ever.

Investors will receive $17.50 a share. That's 4.7% more than yesterday's closing price and 28% more than before speculation about a purchase surfaced on May 29.

This is the latest in a string of high tech LBOs. Recent ones include:

• Acxiom Corp. (NASDAQ: ACXM): This computer and database services provider said May 16 it's being bought by Silver Lake and ValueAct Capital Partners LP for about $2.24 billion.
• Alltel Corp. (NYSE: AT): The fifth-biggest U.S. wireless service agreed May 21 to be bought by TPG and Goldman Sachs Group Inc. (NYSE: GS) for $27.5 billion.
• CDW Corp (NASDAQ: CDWC) agreed on May 30 to be acquired by Madison Dearborn Partners LLC for $7.3 billion.

I am not sold on the competitive advantages that will result from this deal. Maybe there's some overhead to be cut but I question how much private equity is willing to invest in R&D to jump start Avaya's product pipeline.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.

Avaya (NYSE: AV), which makes telecommunications equipment for enterprises, may be the latest company to be bought out by private equity interests. After rumors that Nortel (NYSE: NT) might be a buyer, it now appears that TPG Capital or Silver Lake Partners might be the buyers.

Avaya's stock has been trading in the $13 range. Word is that a buy-out might bring $17.

Avaya has a long legacy in the telecom industry. It has been at one time or another part of the original AT&T and Lucent, which merged with Alcatel last year.

Whether Nortel ends up owning Avaya or not, it is probably a better strategic fit than almost any other acquirer. While Avaya sells the telecom equipment that large companies use, Nortel sell the equipment that large telecom companies use. The odds that there is overlap in R&D and management costs is fairly high. There is also a duplication of public company costs.

With Avaya's stock already above $17, either a buy-out will be announced in the next few days, or there will be some very disappointed shareholders.

Douglas A. McIntyre is a partner at 24/7 Wall St.