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MELBOURNE, Australia -- Private-equity cash is pouring into Australia, helping to fuel a takeover boom.

In June, private-equity fund TPG-Newbridge bought the 106-year-old Myer department-store chain from Coles Myer Ltd., Australia's second-biggest retailer, for about 1.4 billion Australian dollars (US$1.07 billion). The price, which far exceeded most market expectations, set a high-water mark for private-equity deals in Australia.

Private-equity firms raise money from big investors to buy businesses, typically piling on debt to finance the deals. Ultimately, the firms aim to make some improvements and take the businesses public again or resell them at a profit.

Last week, a consortium of corporate-buyout firms raised the bar in a big way. Kohlberg Kravis Roberts & Co. is leading a group that has offered to acquire all of Coles Myer, according to people familiar with the situation. While terms of the bid aren't known, it is expected to exceed A$15 billion, or about US$11.4 billion, which would make it the biggest takeover offer of any kind in the country's history.

In recent months, private-equity deals have been coming thick and fast. Australia-based Gresham Private Equity paid close to A$130 million to take over Witchery, a popular women's fashion chain. An Australian fund, Ironbridge Capital, led a buyout of Queensland furniture company Super Amart that valued the company at A$500 million. Yesterday, a Hong Kong-based buyout group, Affinity Equity Partners, raised its offer and won board approval to take over Colorado Group, valuing the clothing and shoe retailer at A$450 million.

KKR made its first splash in Australia in June, when it paid A$1.83 billion for the waste-management business of Brambles Industries Ltd. But news of its potential bid for Coles has investors wondering if all assets worth more than A$10 billion might now be vulnerable. In Australia, that would include the top 20 businesses -- blue-chip companies previously thought to be beyond private equity's reach.

In reports last week, Citigroup Inc. and J.P. Morgan Chase & Co. analysts suggested that Anglo-Australian Rio Tinto PLC and BHP Billiton Ltd., the world's two biggest mining companies, are now possible candidates for leveraged buyouts.

If Coles Myer is sold, "it will be an absolute watershed," says Nick Holder, a Sydney-based director of L.E.K. Consulting, which has advised on some of the biggest deals this year. A deal that size by a private-equity firm "is a big, big change in corporate life here," he adds.

Global trends -- the availability of relatively cheap credit to finance highly leveraged deals, and the huge amount of privately managed money now scouring the globe in search of deals -- are just part of what is driving the private-equity boom down under.

Australia is enjoying its 15th consecutive year of economic growth, which has helped fuel a surge in mergers and acquisitions. The value of M&As in Australia rose to A$59.9 billion in 2005, nearly double the A$31.8 billion three years earlier. Almost A$53 billion in deals already has taken place in the 2006 calendar year, according to Thomson Financial.

Some of the world's biggest buyout firms have set up shop here. Carlyle Group, of Washington, D.C., opened a Sydney office in late 2005. Newbridge Capital, the Asian arm of U.S. firm Texas Pacific Group that acquired Myer department stores, established a Melbourne office in 2004. (TPG-Newbridge was the combined bidding vehicle for the Myer deal.)

The similarity of Australia's business culture to the U.K. and the U.S. makes it an easy transition for private-equity funds operating in those markets.

"You can bring the same business model you've been operating under in Europe or North America and pretty much transplant it unchanged into the Australian context," says Peter Wiggs managing partner at local buyout firm Archer Capital. "That's not something you can do in the Asian markets."

CVC Capital Partners, one of Europe's biggest private-equity firms, raised its first fund in the region in 1999. It opened a Sydney office soon after, buying Pacific Brands in 2001, maker of some of Australia's best-known underwear brands. Pacific went public again in 2004, raising A$1.26 billion, nearly double the A$730 million CVC Asia Pacific and its partner in the investment Catalyst Investment Management paid for it.

Home-Grown Funds

Australian private-equity funds also have fueled the trend. The war chests of home-grown funds grew to A$3.1 billion in the year to June 30, 2005, from A$609.9 million in the 2003 fiscal year ending June, according the Australian Private Equity and Venture Capital Association. A further A$3.1 billion already has been raised this fiscal year, with at least an additional A$1 billion fund in the pipeline, Avcal says.

A compulsory employee-savings scheme has contributed to the ballooning supply of cash. Over the past decade, the plan, under which employers pay 9% of a worker's annual wage into a retirement fund, has handed billions of dollars to fund managers every year. A growing amount of this is deployed into private equity, chasing above-market returns.

Two or three years ago, says Peter Hunt, executive chairman of Australian investment bank Caliburn Partnership, M&A activity was driven by companies looking for ways to grow and cut costs through acquisitions. These companies "almost invariably paid the highest prices, because they could extract the synergies," he says. "Now you've got private equity paying the highest prices."

Boom in Commodities

Australia's resource giants have been the beneficiaries of a global boom in commodity prices fueled in part by demand from China. In his report last week, suggesting that BHP Billiton and Rio Tinto could be fair game in this market, Citigroup analyst Heath Jansen didn't say such a move was likely. But he calculates that the relatively low level of borrowing by the mining giants and the unprecedented depth and breadth of debt capital markets could make such deals possible.

J.P. Morgan analyst David George said that while there hasn't been a large private-equity acquisition of a resource company, "it is only a matter of time before private-equity funds start looking beyond the more traditional sectors."

"Prior to the Brambles deal, you would have said a billion dollars was the ceiling on buyouts and then KKR come along and did A$1.83 billion," Archer Capital's Mr. Wiggs says. If the Coles deal were to happen, he adds, "pretty much every company in Australia could potentially be a buyout."