Whether it's small "tuck in" acquisitions, large megamergers between industry giants, or even taking significant stakes in another company, 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
We're going to take a shortcut to decipher the good deals from the dealbreakers. We'll see how the more than 59,000 investors in the Motley Fool CAPS universe rate these companies' hookups. 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.

Merger activity remains high this week. Here's a handful of the recently announced deals, and the CAPS community's ratings on its scale of one to five stars (with five stars being the best):


CAPS Rating


CAPS Rating

Deal Price

Hilton Hotels (NYSE:HLT)


Blackstone Real Estate Partners


$26 billion

Bausch & Lomb (NYSE:BOL)


Advanced Medical Optics (NYSE:EYE)


$4.2 billion

Reddy Ice Holdings (NYSE:FRZ)


GSO Capital Partners


$1.1 billion

Option Care (NASDAQ:OPTN)


Walgreen (NYSE:WAG)


$850 million

Despite the thought that mergers may slow, there's still plenty of action, including private equity. According to Thomson Financial, private equity investments in M&A deals have tripled from last year to $281 billion and account 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 company cash hordes also are 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.

Diving into marine services
So what do CAPS investors think about these targets and acquirers? Apart from Walgreen, investors don't seem too keen on these companies. Maybe the feeling for the bulk of them is "good riddance," though the Advanced Medical Optics bid for troubled Bausch & Lomb may bring a tear to the eye, as a bidding war could open up. Bausch & Lomb had previously agreed to be acquired by private equity group Warburg Pincus.

Walgreen's bid for Option Care follows its line of similar acquisitions recently for other specialty pharmacies. Perhaps it's the idea of Wal-Mart (NYSE:WMT) becoming a larger player in the pharmacy field, or maybe it is Walgreen wanting to solidify its holdings as a top national pharmacy provider, but it gives the company the opportunity to provide patient-focused health care services.

  • All-Star, ari21, sums up Walgreen's advantages: "Growing earnings every qt and every year for over 12 years, no debt. Lots of cash, Great plan to run over 7,000 stores, Growing home Care business. Benefits from aging population. Opening new markets. Fanatical costs control. Stock buy back program. Great Long Term investment."
  • That's echoed by top-rated CAPS investor Malstryx. "Great company, will only get better as the Baby boomers start into retirement. Love the cash flow of this business."

A Foolish offer
Will the merger announcement be the prescription for growth or a new source of investor headache? What's your take on these deals? Should investors accept the cash or take stock in the new company? Tell the CAPS community if the urge to merge is good to go or whether it would be better to fight for independence.

Wal-Mart is a recommendation of Motley Fool Inside Value. See if investing in beaten-down market stalwarts is the prescription for your portfolio with a 30-day risk-free trial subscription.

Fool contributor Rich Duprey owns shares of Wal-Mart, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.