It's still early, but the tea leaves suggest that Tribune Co. will be hard-pressed not to sell the company, either whole or in parts, to one of the private equity groups that have been expressing interest. Private-equity is where all the money is today - almost $160 billion has entered the arena this year alone. This morning's WSJ reports that the monster Blackstone Group was increasing the size of its private-equity fund to $20 billion. And because these firms typically buy companies with mostly borrowed money - helped by attractive interest rates - they're in a great position to outbid other potential buyers. They're also operating in groups these days (otherwise known as "club deals"), and that makes their leverage even greater.

The Journal story notes that private-equity firms have paid as much as a 20 percent premium on a company's stock price. In Tribune's case, that could mean an offer of around $40 a share. That's still under historic highs, but it's hard to imagine the major shareholders - let's just say the Chandlers, for argument sake - turning down that sure thing in favor of selling off the place in parts. And Tribune doesn't seem to be wasting any time; my guess is that you'll see a deal in the next 90-120 days.

OK, so what would a private equity group do with Tribune - and more specifically, the Times?

Before getting into that, perhaps it would be helpful to remind everybody how private-equity firms work. In many ways, they are like all other investment vehicles aimed at institutional investors - pension funds, endowments, rich people, whatever. They make money by charging fees to their clients and by the dividends extracted from the companies they buy. Eventually, they'll try to make the big money by either selling the company they acquired or taking it public.

Does any of this sound familiar - as in the leveraged buyout craze of the late 80s? You know, corporate raiders and junk bonds? Well, there are similarities, including the recent frenzy to cut deals. Pick up the business section most any day and there's a good chance you'll see a story about a group of private-equity firms interested in some company. Clear Channel, the nation's largest chain of radio stations, is the most recent example. With such huge amounts of money being offered, why wouldn't a company be interested in selling out - especially if it's a company in a sluggish industry, like radio?

Whatever the deal, private-equity firms are always looking at the return. That's their business. In years past, they were usually in it for the long-term (much like venture capital firms), and they would work with management to improve efficiencies and sell off poorly performing units. That sounds a little Gordon Gekko-ish, but the truth is they would often make their company better run and more efficient - even a better place to work. And that would add value for them. These days, however, private-equity firms have speeded up this process - dangerously so. Here's how this week's BW cover story opens:

Three weeks after giant private-equity firm Thomas H. Lee Partners agreed to buy an 80 percent stake of Iowa Falls ethanol producer Hawkeye Holdings in May, Hawkeye filed registration papers with the Securities and Exchange Commission to go public. The buyout deal hadn't even closed yet, but Thomas H. Lee was already looking forward to an initial public offering expected to generate a huge profit on its $312 million investment. The firm didn't just cross its fingers and wait, however: It took $20 million from Hawkeye as an advisory fee for negotiating the buyout and a $1 million "management fee" - and will soon take about $6 million to meet its own tax obligations. All told, Thomas H. Lee will collect payments of around $27 million by yearend - despite Hawkeye's having earned just $1.5 million in the six months through June.

Given such a rip-roaring climate, where returns are sometimes calculated in weeks, not years, the obvious question is how would a private equity firm (or firms) look at the ownership of a newspaper company? Would they recognize the public service role of a newspaper, even if it meant eating into their returns? (C'mon, stop laughing - this is serious). The most recent case study to draw from is the OC Register, whose parent company is 40 percent owned by Blackstrone and its co-investor, Providence Equity Partners. Freedom CEO Scott Flanders told the LAT earlier this year that since Blackstone/Providence made their investment in 2003, cash flow at the Register had doubled. Part of it was an improving economy, but part of it involved cutting back.

Roughly 40 newsroom employees are said to have accepted a recent buyout offer out of a newsroom of 300 or so. Even in announcing the good news that large-scale layoffs would not be necessary, Freedom Orange County Information CEO Chris Anderson said in a memo: "At the same time, we continually look for opportunities to reduce expenses where appropriate and required based on business conditions. That means I can't and won't promise no layoffs in the future."

It's not to say that Blackstone or any of the others won't allow reporters and editors to do great journalism. My guess is that they would encourage it - or at least say as much - because of the additional value it might provide the company. I mean, if the L.A. Times suddenly started looking like the Arizona Republic or Kansas City Star, there would undoubtedly be an incremental dropoff in the value of the enterprise. And that would have to worry any private equity owner. That's why Dean Singleton always insists that he wants a quality product. But what Singleton considers quality from a business standpoint probably differs a fair amount from what LAT editors and reporters consider quality from a journalistic standpoint. And that's the rub. (I suspect there's a workable middle ground.)

So maybe the LAT will luck out and be bought by another media company - or better yet, by Geffen, Broad or Burkle. Well, just remember what's going on in Philadelphia. As noted in the NYT:

Four months ago, Brian Tierney, a local public relations and advertising executive, acquired The Philadelphia Inquirer and Daily News from Knight-Ridder and declared, “The next great era of Philadelphia journalism begins today with this announcement.” Last week, he was forced to scale back his plans significantly. In a letter to the company’s employees, he said the paper’s finances were in a “very difficult position.” He suggested that “without immediate and dramatic changes to the business,” the company would “not have enough cash to make our interest payments” in 2007. Speaking yesterday in New Orleans at a meeting of the Associated Press Managing Editors, Hank Klibanoff, managing editor for news for The Atlanta Journal-Constitution, which is privately owned by the Cox family, said local ownership may seem appealing to people at papers that are publicly owned, but the critical question was whether the owners understood and cared about newspapers.