Is the large buyout market on its way back? There are no straight answers on the internet, discovers Nicholas Lockley.

The credit markets have begun their long road to recovery. Finally, Alliance Boots' debt is beginning to shift almost a year after the deal was done. The underwriting banks tentatively put feelers out and discovered demand is much more solid than they expected.

But whether this signals the return of large private equity appears to be a matter of perspective.

Over at “Blogging buyouts” [] David Rubenstein was winning plaudits for putting his firm's money where his mouth is.

The blog follows a typical formula for many articles about large buyouts. It is a classic dramatic arc of hubris, nemesis and, if we are lucky, redemption.

First you introduce the overweening ambition of the buyout chiefs at the peak of their power: “About a year ago, the rage in private equity was the so-called mega-buyout. It seemed like no company was immune. There was even talk of $100 billion deals.” Indeed there was talk, but even at the top of the market it was always speculation and emphatically in the future tense.

Next comes nemesis: “Of course, the credit crunch ended the mega-buyout. In fact, it ended most of the activity for private equity folks.”

Finally we are beginning to see the first signs of our hero's return to grace. “Yet, according to the co-founder of The Carlyle Group, David Rubenstein, things are perking up. His firm – like other veterans, such as The Blackstone Group – understands market cycles. After all, these players have dealt with a variety of credit crunches, such as in 1991-1992, 1998 and 2001-2002.”

Rubenstein is predicting a pick-up in deals over the next few months. However, the deals are likely to range from $2 billion to $4 billion, have less debt, and many will be foreign.

“Funny enough, Rubenstein seems to be leading the charge with Carlyle's recently announced $2.54 billion deal for a majority stake in Booz Allen Hamilton” the blog continues.

Perhaps not funny, just consistent.

Meanwhile at Reuters [€4] the good news is that global M&A activity is unlikely to slip into a “precipitous downturn”, despite the slowdown in deals this year.

In a research report, Citigroup, the investment bank, says there is still an appetite for acquisitions and there is still hope for bankers as cheaper valuations provide an opportune time to buy.

Some of the biggest pending deals include Mars' $23 billion acquisition of Wrigley for cash; Westpac's $17 billion acquisition of St George for equity; BG Group's $15 billion acquisition of Origin Energy for cash; and Hewlett-Packard's $13 billion acquisition of Electronic Data Systems for cash.

Are you noticing a trend here? Cash is king.

The report says: “We believe activity will continue to recover as we progress through the more mature phase of the bull market. Mature bull markets are consistent with rising M&A as corporate confidence stays high and equity financing becomes the preferred option.

The report does say, however, that, as M&A recovers, it will not be in the same form as it was in 2006 or 2007, reflecting the changing availability of financing. Investors should expect less debt and more equity-financed deals. Large companies with strong balance sheets will be the main driver of activity, not private equity.

Our buyout hero has a few more obstacles to overcome before he can take his place centre-stage once more. And it won't just be a result of Rubenstein talking up the market – though that probably doesn't hurt.