Use it or lose it. That is the choice faced by some buyout firms sitting on piles of capital they have raised but not invested. The firms are unlikely to give it up without a fight.

A fund-raising arms race last decade was followed by a sharp slowdown in investments, leading levels of dry powder to surge. Such undeployed capital stood at a record $280 billion among U.S.-focused buyout firms at the end of 2009, according to research firm Preqin.

The catch is that firms generally agree to invest capital within five years or return it to investors. For some, the deadline is fast approaching. U.S.-focused buyout funds have $51 billion that must be used before the end of 2011, Preqin says. Another $213 billion needs to be invested by 2015.

Raising new money isn't that easy anymore. So, the worry is that firms will lower the bar on the quality of investments to ensure existing funds are put to work. One risk is that firms begin to chase after deals and overpay.

Any buying frenzy would be constrained by credit markets. Yes, deals now use less leverage than in the credit boom, when some relied on equity of 15% or less. But even assuming 30% to 35% equity, about $100 billion in high-yield debt and leveraged loans is needed to support $50 billion of equity.

Raising that much debt for LBOs might be tough. In 2007, about $200 billion of the $527 billion in U.S. bond and leveraged-loan financing was tied to LBOs, according to Barclays Capital. But in the first five months of 2010, when $194 billion of high-yield bonds and loans were placed, just $11 billion was used for LBOs, Barclays says. Bond investors are more skittish about LBOs.

What sort of LBO is still possible? Right now, debt markets likely wouldn't back a deal as large as the $15 billion buyout of financial-data processor Fidelity National Information Services that collapsed several weeks ago. Risky bets on firms with shaky cash flow also will be tough. That leaves funds with a smaller pool of targets. Combined with the need to contribute more equity, potential returns are limited.

That may cause pressure to move beyond regular LBO deals. Some already have. BC Partners last year bought preferred shares in Office Depot when the stock was bombed out. Other firms have found ways to double down on investments they already own.

Apollo Global Management and TPG recently invested $200 million in debt issued by casino-operator Harrah's Entertainment, which they took private in 2008. Other buyout firms have purchased bonds in companies they don't own.

Now the clock is ticking, buyout funds may feel pressure to show they have the nerve for more aggressive deals. Whether their investors will share the enthusiasm is another question.

John Jannarone

• research [ri´sə:tʃ] n.&vi.调查；探究；研究 (初中英语单词)
• invest [in´vest] v.投资；授予 (初中英语单词)
• contribute [kən´tribju:t] v.贡献出；投稿；捐献 (初中英语单词)
• pressure [´preʃə] n.压榨 vt.对...施压力 (初中英语单词)
• management [´mænidʒmənt] n.管理；处理；经营 (初中英语单词)
• entertainment [,entə´teinmənt] n.招(款)待；联欢会 (初中英语单词)
• enthusiasm [in´θju:ziæzəm] n.热心；狂热；爱好 (初中英语单词)
• decade [´dekeid] n.十年(间) (高中英语单词)
• billion [´biljən] num.万亿 (高中英语单词)
• potential [pə´tenʃəl] n.&a.潜在的；可能的 (高中英语单词)
• frenzy [´frenzi] n.&vt.(使)狂乱 (英语四级单词)
• fidelity [fi´deliti] n.忠实；精确；保真度 (英语四级单词)
• aggressive [ə´gresiv] a.进攻的；侵略的 (英语四级单词)
• unlikely [ʌn´laikli] a.不像的；未必可能的 (英语六级单词)
• equity [´ekwiti] n.公平；公正 (英语六级单词)