Whether it's small "tuck in" acquisitions or large megamergers between industry giants, the urge to merge remains strong.

We can't always tell the good deals from the bad. While we might get "synergy," we can just as easily get what investing legend Peter Lynch called "de-worsi-fication:" weakening an existing business's core competency by grafting on wildly unrelated subsidiaries.

Breaking down the buildup
Let's take a shortcut to decipher the good deals from the dealbreakers. We'll see how the 29,000 ranked investors in the Motley Fool CAPS universe rate these merging companies. If two highly rated companies seek a better life together, we figure they might also do better down the road. Conversely, if one company is highly rated and the other low, we might expect one set of investors to come out ahead, since those ratings forecast investor sentiment of future prospects.

Here's a handful of some of the recently announced deals, and the CAPS community's ratings for the players involved on its scale of one to five stars (with five being the best):


CAPS Rating


CAPS Rating

Deal Price



Agile Software (NASDAQ:AGIL)


$469.90 million

TPG Capital/GS Capital Partners


Alltel (NYSE:AT)


$27.80 billion

Lehman Brothers (NYSE:LEH)


Archstone-Smith Trust (NYSE:ASN)


$13.54 billion





$346.35 million

Madison Dearborn Partners




$7.31 billion

Private equity, we see, is still very active in the M&A field. According to Thomson Financial, private equity investments in M&A deals have tripled from last year, to $281 billion, accounting for 35% of all mergers and acquisitions. That's more than double the 16% they represented last year.

While the boom still goes on, public companies' cash hoards are also fueling the M&A boom. According to Cullen High Yield Value Equity, the companies on the S&P 500 had $1.2 trillion in cash on their balance sheets, accounting for 21% of their market value, and apparently burning a hole in their collective pocket.

So what do CAPS investors think about these targets and acquirers? Well, it looks like some of the top-rated stocks have been targeted by private equity, while lower-rated stocks have been eyed by their public peers. The acquisition of the fifth-largest regional wireless carrier, Alltel, also happens to be the third-largest leveraged buyout (LBO) in history, according to Dealogic.

All over at Alltel?
Takeover rumors have swirled around Alltel for awhile, and last month, CAPS investor FIKid predicted Alltel would become an acquisition target sooner rather than later:

AT will only be available for the next couple of months because there is a high likelihood it will be bought. It is an obvious takeover candidate because of large and rapidly growing wireless subscriber base. With the huge economies of scale in the wireless indusrty, the hyper-competitiveness of the big wireless companies and their need to grow, I can't imagine a scenario where AT stays independent much longer.

An awkward acquisition of Agile?
While Alltel is considered a bright prospect, you might be wondering what Oracle saw in Agile Software.

According to industry analyst and research firm Netscribes:

[The] software industry is highly competitive and fast moving industry. In order to be successful company has to out pace competitors with innovations and better service to customers. In such scenario, ASC's competitors are better capitalized to take advantage of opportunities in market. ASC is engaged in complex software and any flaw in product would diminish demand and expose firm to litigation. The company's strategy to spend less on innovations in newer software such as PLM is expected to have negative impact on license growth.

ASC's growth strategy consists of acquisitions and product development. But it has not yet helped company to report positive net income even once. ASC will have to come up with something extraordinary to record positive profits. As of now, there seems to be very less upwards growth drivers for stock.

What's your take on these deals? Should investors accept the cash, or take stock in the new company if it's offered? Tell the CAPS community whether the urge to merge is good to go, or whether these companies would be better off fighting for independence.

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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.