Buyout or Sellout?

From tiny acquisitions to massive conglomerate combinations, the Wall urge to merge on Wall Street remains strong. How can we tell the dealmakers from the deal breakers?

Breaking down the buildup
To help, we'll turn to the 130,000-plus investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new company's future results, while a high-rated company that joins a lower-rated one may benefit one set of investors more than the other.

Despite troubles in the capital markets, the deals won't stop; they simply might involve more stock and less cash. Or, like this week, they might just slow to a trickle. Here are a handful of recently announced deals, and the ratings for each participating company on CAPS' five-star scale:

CAPS ratings courtesy of Motley Fool CAPS; NR = not rated.

Into it deep
Maybe it's simply just trying to stay relevant, let alone stay alive, but the purchase of Cougar Biotechnology and its cancer drug portfolio gives Johnson & Johnson another set of therapies in late-stage development that can support the growth of its pharmaceutical business.

Even before the announcement, CAPS All-Star member coryjobe appreciated the pharmaceutical's ability to snap up promising companies.

Very active on making acquisitions of other companies which is a very good sign during a recession, could see some stall in the earnings growth this year [because of] high competition for the analgesic drug dragesic and the schizophrenia drug Respardil. This will more then likely not hurt the stock price [too much] as estimates of an economic rebound coming late 09, early 10 will have people buying back this stock in a hurry. JNJ makes roughly 7.5 billion a year that it will continue to use in paying dividends, buying back stock and making more acquisitions. They are as close to a monopoly as you can get in America.

Calling out growth
Short-messaging services should continue to be a lucrative business for TeleCommunication Systems, if my daughter's text-messaging prowess continues to blow up her phone the way it does. TCS continues to benefit from the growth in text messaging, particularly at Verizon (NYSE:VZ), its primary messaging customer, which accounted for 22% of revenues in 2008.

CAPS member igmud thinks European expansion will continue to solidify TeleCommunication Systems' leadership position.

High growth software and satellite company carrying the stigma of the telecom industry. With significant revenue from services to government and military and license fees from telecom this company is positioned well.

A leader in text messaging software and GPS capabilities for cell phones they are focusing on the high growth segments of the telecom industry. They have strategic advantage in their technology that is well supported by patent picket fences. Their patent protection has been proven in court.

With the EU moving to GPS location of cell calls to emergency (US 911) TSYS is positioned well. Their entry into China will generate incremental revenue from existing proven technologies. China's growth in texting offers TSYS new revenues and future annuities from services and licenses.

A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. And while you're there, you can start your own research on these or other stocks. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. There's more at CAPS than you think.