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The cycle continues: Bajaj and GTCR are ready for their third go-round. Recent securities filings indicate Bajaj and GTCR created a company in March called SystemsNet Inc., a consulting company. Bajaj declined to say what business SystemsNet will pursue but let on that GTCR has committed more acquisition capital than the $100 million in equity it put up for DigitalNet. "As yet, I haven't acquired," said Bajaj in a telephone interview last week at his Potomac home.

Ready for Bigger Deals

Nationally, private equity firms still play a relatively small role in the merger-and-acquisition market. Less than a quarter of all corporate acquisitions are by private equity firms, according to many independent studies. To the contrary, most mergers are still of the traditional, strategic variety: One telecommunications firm buys another; one bank partners with a former competitor.

But the rich returns delivered by some private equity investments in the IPO market, coupled with the huge amounts of money being raised by private equity funds and the easy availability of debt financing for acquisitions, mean that private equity firms will remain persistent competitors in the deal market, said Louis J. Bevilacqua, chairman of the corporate mergers and acquisitions group at law firm Cadwalader, Wickersham & Taft LLP in New York.

If anything, the deals are expected to get larger. Leveraged buyouts have rarely been more than $5 billion. But Bevilacqua said a $20 billion-plus deal is within reach.

"You are likely to see those deals in the next year," he said. Private equity firms "are flush with money and want to compete for the mega deals. The increased size of funds will be an advantage, as it will take only a few private equity firms partnering together in order to raise the necessary equity for very significant transactions."

"The relative aggressiveness of lenders and consequent cheapness of debt has augmented the size of the transactions that private equity can do," Facchina said.

The District's Carlyle Group recently raised a $7.8 billion U.S. buyout fund. With borrowing, that single fund has more than $35 billion in buyout power.

According to research by the Buyouts newsletter, 158 leveraged buyout funds are in the market trying to raise $117 billion from investors, and have so far raised $36.6 billion. Combine that with low interest rates and the eagerness of lenders to finance the big deals, and buyout firms are operating in a kind of Elysian sweet spot.

Throughout the 1990s, a $1 billion-plus buyout fund was rare. The vast majority of the estimated 1,200 active private equity funds had far less than that in funding and plied their trade among small and mid-sized target companies in industries the fund's managers specialized in.

That is still the case today, but a growing number of funds are making a specialty of their size and ability to do larger buyouts. In addition to Carlyle, Blackstone Group, Goldman Sachs Capital Partners and several other major private equity players have raised or will raise funds of $8 billion-plus this year.

What's more, by joining with other big funds in so-called "club" deals, the major funds could easily do a $30 billion buyout. To give an idea of what that would mean: Lockheed Martin Corp., the Washington area's biggest industrial company, was worth $27 billion two weeks ago.

In March, seven funds agreed to buy Pennsylvania financial software maker SunGard Data Systems Inc. for $11.3 billion, 44 percent more than SunGard was worth before word of the deal leaked. SunGard's purchasers will borrow a whopping $8.5 billion from five institutions to finance the deal.