Over the past couple years, going-private transactions seemed like no-brainers. Private equity firms would buy companies at good values, borrow lots of money, then get juicy returns from dividends, as well as the eventual sale or IPO of the company. Now, things are changing, as major institutional investors and hungry hedge funds want a bigger piece of the action. For proof, look no further than the $3.2 billion buyout of OSI Restaurant Partners (NYSE:OSI).

In late April, OSI issued $550 million in corporate bonds to finance its buyout. Then, on Tuesday, the company announced that it had returned the money.

Huh? Returned the money? Even after the securities have already started trading? That's right. Existing trades will be nullified as if they never occurred. They were due to settle May 9, 2007. But if you read the voluminous bond documents, you'll spot one contingency: OSI needs to get shareholder approval on the deal. Unfortunately, OSI postponed the vote to May 15; as of the previous deadline, it had not garnered enough votes to seal the transaction. To me, that's a sign that investors want a higher price.

Keep in mind that back in November, when Bain Capital Partners and Catterton Partners made their buyout offer, OSI was in a funk. Profits had fallen for three years as concepts like Outback, Carrabba's, and Bonefish Grill continued to deteriorate.

According to a recent piece from Fool colleague Matthew Crews, the OSI deal came to 9.1 times EBITDA, in line with other comparable valuations such as Darden Restaurants (NYSE:DRI), Ruby Tuesday (NYSE:RI), and Brinker International (NYSE:EAT).

Yet OSI's institutional investors have a fiduciary duty to maximize valuations on their holdings. They also realize that Bain and Catterton have ample opportunities to turn things around. The strategies include divesting some of its concepts, selling off real estate, and chopping away at the cost structure.

Does this mean OSI will get a higher bid? It's too tough to tell, because sometimes private buyers walk away from deals. Just take a look at the failed Eddie Bauer (NASDAQ:EBHI) buyout. Foolish investors thinking of playing this trade should remember that it's definitely a risky proposition.

Further Foolishness:

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 3,449 out of 27,827 in CAPS.