The masters of the universe -- those whiz kids who structure M&As, IPOs and other corporate finance deals -- got crushed during the bear market. Some of these investment bankers were even charged with crimes, such as Credit Suisse Group's (NYSE:CSR) Frank Quattrone.

Well, things are coming back. There are now mega-deals, such as the Bank One/JP Morgan Chase (NYSE:JPM) transaction, and even high-profile IPOs, such as Google, (NYSE:CRM), Blackboard (NASDAQ:BBBB), and Blue Nile (NASDAQ:NILE).

The hardest hit in the investment banking world were the mid-tier players. However, the survivors are now positioned to reap the benefits of the turnaround.

One such player is Jefferies & Co. (NYSE:JEF).

For the second quarter, Jefferies posted net income of $31.8 million, a 70% increase from the same period a year ago. Revenues were $277.2 million, a 20% bump. The company also announced a bonus for shareholders; that is, an increase from $0.08 to $0.10 a share for the quarterly dividend, bringing the yield up to 1.41%.

The company has diversified across various services beyond M&A, such as private placements of debt and equity and convertible offerings.

Jeffries is growing its asset management business, which surged 169% in the past year to $18.8 million in revenues. There is also a hedge fund operation with $2.8 billion in asserts.

With much less competition, Jefferies has capitalized on the middle-market space (companies with market caps below $2.5 billion). True to form, management expressed a conservative outlook on its conference call. But the middle market looks like a niche that will continue to grow for some time.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.