Bettor's Guide to Buyouts

4-to-1 Odds

Lexmark International (LXK Quote) Market cap: $4.5 billion.

One prerequisite for a leveraged buyout candidate is strong cash-flow generation. Buyers must be sure that a company will be able to make interest payments after its balance sheet it loaded up with debt.

Lexmark, a printer business originally bought from IBM (IBM Quote) by private equity players in 1991, boasts strong cash flow despite competitive pressures that have hit its top line. The stock, which has shed roughly 40% of its value over the last two years, caught an updraft in November after analysts said an LBO appears economically viable.

Takeover artists also look for underperforming, non-core assets that could be sold, and Lexmark's money-losing inkjet business could be ripe for divestiture.

4-to-1 Odds

U.S. Steel (X Quote). Market cap: $5.5 billion

The manufacturing sector has always been a shopping center for private equity, and U.S. Steel, which boasts significant steelmaking capacity in the U.S. and Central Europe, is considered undervalued in some quarters.

After dropping as much as 32% this year, its shares have rebounded in recent months after a takeover battle for Dofasco, a medium-sized Canadian steelmaker, renewed Wall Street's interest in the company.

5-to-1 Odds

Computer Sciences (CSC Quote). Market Cap: $9.2 billion.

CSC, one of the world's largest information technology firms, with $14 billion in annual revenue, held talks with Lockheed Martin (LMT Quote) about a sale in November that never bore fruit. Still, buyout specialists could take a shine to the company, since Uncle Sam is expected to be stepping up outsourcing of computer and other technical systems work to IT firms. CSC stands to benefit.

Government contracts result in some of the most reliable revenue streams in the market, and CSC shares, having dropped over 20% in the first half of the year, have been spiking in anticipation.