Not too long ago, a few banks shied away from private equity activity because they did not want to compete with their clients. Lehman Brothers for one has stuck to this. That proved to be a dubious choice by some measures, notably some earnings left on the table. These days, most top banks have robust private equity operations and that has made more conflicts a certainty. The old saw that "we will not compete with clients, we'll invest alongside them when they want us to" really isn't holding true. As investment banks raise bigger funds, we're going to see some odd partnerings. What would happen if a top bank fund and one of its clients were gunning for the same deal? It could get awkward. 

For more:
- here's a New York Times article
- more private equity news