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"The mega funds are getting more and more mega," said Perry W. Steiner, managing director at Arlington Capital Partners, a mid-sized District-based buyout firm whose investors have committed $450 million in equity capital. "And these mega funds have been returning very well, from an investor standpoint. So their fundraising capabilities seem to be endless at this stage. The lending markets are as strong as possibly they've ever been. So you'll continue to see these large transactions."

IPOs, the Favored Exit

While getting into a leveraged buyout is easier than ever, getting out of one is another matter. The method of choice these days is the initial public stock offering, and leveraged buyout shops have joined venture capital firms in using the IPO as the cash-out of choice. According to Buyouts, 15 companies backed by leveraged buyout firms went public in the first quarter of this year, raising more than $6 billion. That's 84 percent higher than the previous record, set in the fourth quarter of last year.

The biggest IPOs in the Washington area in the past year are all companies owned by private equity firms. Topping that list is Foundation Coal, which raised $519 million in an IPO in December. Most of that money was paid as a special dividend to Blackstone and First Reserve.

On tap is Neustar Inc., a Sterling-based telecommunications services company owned by three private equity firms: Warburg Pincus LLC, MidOcean Partners (both of New York) and Baltimore's ABS Capital Partners. Warburg bought Neustar from Lockheed Martin in 1999 for an undisclosed price and later brought in MidOcean and ABS for expansion capital. According to Securities and Exchange Commission documents, the three private equity firms will receive all of the proceeds of the stock offering: $690 million.

Of course, the key links in this cycle from private to public ownership are high-yield debt and investor appetite for it. Though equity firms commit substantial amounts of their own money when they buy companies -- usually anywhere from 10 percent to 40 percent of the purchase price -- they must borrow the rest, usually at a big interest rate premium.

Eventually that debt has to be replaced with further investment, either through a public stock offering or a sale to another buyer. Some economists worry about the ability of private equity firms to sustain the process at a time when the sizes of the deals are increasing and stock markets may be growing fickle.

For now, though, the cycle is working.

Bevilacqua said there is plenty of money around, and markets have responded well to new stock offerings.

"Investors and lenders continue to believe the economy is going to remain strong," he said. "The one big issue that could cause a chill would be if interest rates spike dramatically."

Is it a bubble? Steiner doesn't think so. In his view, private equity is merely ramping up its role as an intermediary, providing private, debt-financed companies with more stable ownership and capital structures. And purchase multiples -- the buyout prices paid for companies relative to their core earnings -- have remained in check, according to recent studies.

"There is so much capital available," Steiner said. "These deals are going to continue for some time. I don't believe there is a bubble, based on the purchase multiples we're seeing. If there's a bubble, it may be a bubble only in size, not in the underlying fundamentals of the deals. You don't see anybody saying, 'Oh my God, can you believe the price they paid for that company?' ''