Has boom in going private hit its peak?

What does it mean when private-equity groups – some of the savviest investors on Wall Street – want to give you the opportunity to buy shares in their enterprise?

Some see it as a chance to make the kind of investment returns that bring visions of yachts bobbing off the beaches of St-Tropez. Or it could mean that the insiders at these companies think it will be harder to make money in the future and want to start cashing out now.

Either way, signs are appearing that private-equity groups may be having more difficulty making deals, and how they conduct business is starting to change.

As of last Friday, for between $31 and $35 per share, anyone could own stock in the Blackstone Group, one of the nation's premier private investors. Similar private-equity groups are reportedly poised to offer shares as well. This means that these groups, which were set up to make money for pension funds and millionaires, are now bringing their hard-charging ways to Main Street.

"The optimist would say this is a chance for the little man to ride the coattails of the fat cats. After all, no one in those companies plans to retire tomorrow: They still work 23 hours a day and make billions of dollars," says Sam Stovall, chief investment strategist at Standard & Poor's in New York. "The cynic says, 'If someone had the ability to triple their money, why tell me?' "

Private-equity groups make most of their money by acquiring companies, stripping the fat from them, and reselling them as more-profitable enterprises.

While many Americans may not be familiar with the companies themselves, they would know many brands owned by them. Blackstone, for example, owns the manufacturer of Gold Toe socks; Michaels, the nation's largest chain of craft stores; and Orangina, the European soft drink.

Kohlberg Kravis Roberts & Co., another private-equity firm, owns Hospital Corporation of America; Sealy, the bedding company; and Toys "R" Us.

But the climate for such dealmaking may be changing.

So far this year, the number of mergers and acquisitions has exceeded $2 trillion, up 57 percent compared with the same period last year. "But we were up 67 percent through the middle of May," says Mr. Stovall. "One reason could be these deals are becoming more costly, and that has resulted in deals not getting done."

The deals are getting more costly because long-term interest rates are rising. "The private-equity companies borrow money in huge amounts," says Axel Merk of Merk Investments in Palo Alto, Calif. "As rates move higher, the deals they do become less attractive."

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