Bettor's Guide to Buyouts

20-to-1 Odds

Sears Holdings (SHLD). Market cap: $20 billion.

Ed Lampert, the hedge fund manager who used Kmart to buy Sears earlier this year, sometimes acts like a private equity buyer. He's focused on slashing costs, selling off assets and maximizing cash flow. Lampert, however, used equity to buy Sears -- not debt -- and he's trying to trim fat from the retail empire while reaping the benefits of the public market.

Despite his success, the massive publicity that Sears has received appears to be getting on Lampert's nerves, particularly after shares of Sears Holdings plunged 30% since the summer. Rumors are swirling that Lampert is considering taking Sears private to get out of the spotlight.

Despite the chatter, most observers think Lampert will persevere and try to prove his critics wrong again. Taking Sears private would be expensive, but given all the speculation surrounding its real estate assets, the merchants of debt would surely be willing to help Lampert raise the money.

30-to-1 Odds

Gap (GPS). Market Cap: $15.6 billion.

Gap's balance sheet and cash flow have been restored thanks to the financial expertise of its CEO, Paul Pressler. That said, its sales are in a tailspin thanks to a series of fashion missteps that could jeopardize its brand, and it appears to be having a terrible holiday season.

Shares of Gap have shed more than 20% over the last two years. Meanwhile, its three main brands -- Gap Stores, Old Navy and Banana Republic -- are said to be cannibalizing each other. Many feel the assets could be more valuable as separate entities, and parts of the business could probably liquidated. This has the buyout sharks circling.

50-to-1 Odds

McDonald's (MCD). Market cap: $44.4 billion.

After forcing change at Wendy's, Pershing Square Capital's Bill Ackman moved on to fast food's Big Kahuna -- McDonald's (MCD). The hedge fund guru is lobbying the golden arches to spin off its real estate holdings into an investment trust -- a move he thinks could unlock hidden value in the burger chain.

McDonald's, whose shares have languished in recent years, has dismissed the plan as short-sighted, but Ackman is persistent. The sheer size of McDonald's makes a buyout of the company almost fanciful, but as history shows, casino capitalism has a penchant for thinking big.

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