Lights! Camera! Merge!

Sony (NYSE:SNE) would like to acquire Metro-Goldwyn-Mayer (NYSE:MGM) and is willing to partner up with two private equity entities -- Texas Pacific Group and Providence Equity Partners -- to accomplish the mission at a price tag of $5 billion cash (sounds like a job for the dapper Mr. Bond). Shares of MGM closed yesterday with nearly a 12% gain; whether it's an offer of a substantial dividend or the target of a buyout, the company has been interesting as of late.

MGM has something Sony wants -- a valuable film portfolio chock full of premium brands and classic films (not to mention stakes in television channels with a global viewer base). Not only is the aforementioned James Bond part of the MGM stable, but there are all kinds of cool properties housed here, such as the Poltergeist and Jeepers Creepers films (you can see I'm a horror/sci-fi kind of guy). When you add in other franchises, like the Rocky flicks and the Pink Panther comedies, it's easy to see why Sony is interested.

MGM possesses over 4,000 movies to choose from in its library, movies that are ripe for financial exploitation. Come to think of it, such an expansive asset would be desirable for any of the major media conglomerates, whether it be Disney (NYSE:DIS), Viacom (NYSE:VIA), or Time Warner (NYSE:TWX). Content is the lifeblood of any operation that owns cable channels and/or acts primarily as a supplier to networks. Controlling the availability of the revered MGM celluoids is going to be a guaranteed revenue-enhancer.

What should the individual investor make of this putative play?

Well, there's a good argument for stepping aside and letting the institutions or hedge funds evaluate the spread and do their thing. Buying in on any of these companies ahead of a detailed merger scheme is a tricky business at best for the retail trader; just look at recent history as a guide. Shareholders of E*Trade (NYSE:ET) were temporarily excited by the possibility of a merger with Toronto Dominion's (NYSE:TD) TD Waterhouse brokerage unit; until the talks dissolved, and the dream was no more. And not much has been heard lately from Comcast (NASDAQ:CMCSA) over its bid for Disney. Those unprepared for the volatility such capitalistic courtships inevitably lead to probably got burned.

With the growth of the DVD market and the bright future ahead for video-on-demand services, the MGM library will provide a vein of rich opportunities to be mined and monetized for Sony, or whatever acquirer can tame the roaring lion. But, as for investing in these equities based solely on the merger deal alone, a more detailed examination of each story is recommended before greenlighting any buys.

David Gardner recommended Time Warner to Motley Fool Stock Advisor subscribers. To check out the newsletter risk-free for six months, click here.

Fool contributor Steven Mallas owns shares of Disney.