Harvard's Lerner said that the funds typically get about 20 percent of the profits and a management fee of another 1 to 2 percent. With billions of dollars in play, those fees quickly add up.
"It's nice work if you can get it," Lerner said.
The biggest names in private equity include Schwarzman, Henry Kravis, founding partner of KKR, and David Bonderman, founder of Texas Pacific Group.
Last year, 28 percent of all announced U.S. mergers and acquisitions came from private equity funds, according to Keiser, who called that an "unprecedented level of participation."
But it's not just major takeovers that fall under private equity.
These firms also own sports teams like the Boston Celtics, the Albertson's supermarket chain and car-rental company Hertz.
Dartmouth's Blaydon said buyouts used to be dominated by publicly traded companies -- Cisco or Intel, for example, would take over some up-and-coming technology company in Silicon Valley.
"Now the game is almost entirely in the hands of the private equity guys," Blaydon said.
Private equity firms' success stems, in part, from their image. Takeovers got a bad name in the 1980s -- the decade of greed -- when they often were hostile.
Today's deals are a lot friendlier, Blaydon said, with the executives at the target corporation often working to make the deals happen.
Lenders are also now more willing than in the past to let the funds borrow large amounts of cash to make takeover deals.
There has been a major influx of money into the private equity markets in the last several years.
For investors that need cash, the trade-off for the high level of risk associated with private equity investment is the potential for tremendous yield.
And private equity firms are typically in for a quick return. In the past traditional companies would take over others and hold on to the new asset for years and merge them with the existing business.
"These guys are not people who buy and hold. They buy, transform and sell," Blaydon said. "They're sort of a new beast out there."
About four years ago, large pension funds "in a desperate search for yield and returns" started pumping more and more money into the private equity market, Blaydon said.
Large state retirement funds that lack enough assets to pay out future retirement payments are now investing 10 to 15 percent of their assets in private equity, Blaydon said. In the past they were hesitant to go above 5 percent.
Finally, the private equity firms started to team up on some of the larger deals, making it possible to splurge on some of these megadeals.
"These guys went from being solo lone rangers to teaming up as a syndicate," Blaydon said.