Seven of the 10 biggest buyouts this year have been engineered by private-equity firms -- the entities that use debt and investors' money to take over public companies.

In fact, there's been an explosion of leveraged takeovers by private-equity funds that in the last two years have made acquisitions worth $694 billion.

And there's no sign of a slowdown. Private-equity funds this year will raise a record $400 billion from investors and are seeking new targets.

Rhode Islanders learned abruptly last week about private-equity firms when two giants in the industry offered $15.1 billion to buy Harrah's Entertainment. That's the Las Vegas company that wants to build a casino in West Warwick with the Narragansett Indians.

The disclosure shook up the debate over whether voters should approve a Nov. 8 ballot issue to allow a casino here and highlighted the rise in the economic clout of private-equity firms.

The offer to buy Harrah's came from Texas Pacific Group and Apollo Management. They are among the biggest private-equity firms that raise pools of capital from investors looking for bigger returns than what they can get from stocks or bonds.

The private-equity firms identify undervalued companies and combine debt, investors' money and their own to buy them in a leveraged buyout -- a financial term for a takeover of a company using borrowed funds. Often, the target company's assets are used as security for the loans taken out by the acquiring company, which repays the loans out of cash flow.

The private-equity firms try to maximize profits for their investors for a short period -- usually three to five years -- before breaking up the company they acquired or selling it for the biggest return possible.

Texas Pacific, based in Fort Worth and run by James Coulter and David Bonderman, has raised $15 billion for buyouts. Texas Pacific, with other partners, has acquired Neiman Marcus and Petco and is a partner in the pending $33-billion buyout of HCA Inc., the hospital company.

New York-based Apollo Management, cofounded by Leon Black, with $10.1 billion in funds under management, has holdings that include Borden Chemical, AMC Entertainment and GNC, the nutritional supplement retailer.

Private-equity firms have taken over public companies in the media, semiconductors, technology, communications and energy sectors.

But they have mostly shunned acquisitions in the gambling industry because of the disclosure requirements for casino owners.

The Harrah's proposal may change all that because some private-equity firms have found ways to acquire companies in highly regulated industries without having investors undergo the intense scrutiny they want to avoid.

For example, Colony Capital set up a new ownership structure when the Los Angeles-based company acquired Harveys Casino Resorts, a publicly traded company, for $420 million.

Colony required Harveys to issue two classes of stock, one with voting rights and the other without. The two principals of Colony owned the voting shares in Harveys and they were the only individuals who were required to get a license and go through regulatory scrutiny.

The other investors did not have to meet the disclosure requirements.

Others have tried the dual-stock structure, which has passed muster with regulators in Nevada, the state where many companies own casinos. But it's not always a sure thing.

For example, Columbia Sussex purchased Aztar Corp., the owner of Tropicana casinos in Atlantic City, Las Vegas and other places. But when Columbia failed to get a license in Missouri, it forced Aztar Corp. to divest a casino in that state.

Private-equity firms have their eyes on the casino industry because of their rich cash flows and real estate, which can be sold to service the debt from a leveraged buyout or reward investors.

Harrah's, the world's biggest gambling company, has both. That's why Texas Pacific and Apollo offered $81 a share, or $15.1 billion, in what would be the fifth biggest buyout deal in history.

Now that Harrah's is in play, other private-equity firms or other public companies may step up to bid. Other gambling companies may also get unsolicited offers.

In fact, after the Harrah's bid was disclosed, the stock prices jumped for MGM Mirage (MGM:NYSE), the second-biggest casino company, and Wynn Resorts Ltd. (WYNN:NASDAQ), the company run by gambling mogul Stephen Wynn.

Wall Street thinks that the private-equity firms will crack the major players in the casino industry. When that happens, all bets are off.

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