Whether it's small "tuck in" acquisitions, large megamergers between industry giants, or even the taking of 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 sort the good deals from the deal breakers. We'll see how the more than 60,000 investors in the Motley Fool CAPS universe rate the companies hooking up. 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 recently announced deals, and the CAPS community's ratings for the players involved on its scale of one to five stars ... five's the best:


CAPS Rating


CAPS Rating

Deal Price



Medtronic (NYSE:MDT)


$3.9 billion

Rural Cellular (NASDAQ:RCCC)


Verizon Wireless


$2.67 billion

Debs Shops (NASDAQ:DEBS)


Lee Equity Partners


$395 million

MC Shipping (AMEX:MCX)


Bear Stearns Merchant Banking


$284 million

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

Despite the thought that mergers may slow, there's still plenty of action, including private equity. In fact, private equity has invested more than $900 billion in mergers and acquisitions over the first six months of the 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.

Getting the information flow
So what do CAPS investors think about these targets and acquirers? Although Rural Cellular seems to be little thought of by the CAPS community, Verizon Wireless -- a joint venture between Verizon (NYSE:VZ) and Vodaphone -- will be expanding its coverage into rural areas and will gain some 700,000 new customers as a result of the acquisition.

Merchant Bear
It will be a newly formed unit of Bear Stearns' private equity division that will buy the highly rated shipping company which concentrates on shipping liquefied petroleum gas (LPG). The deal includes a "go shop" provision that allows MC Shipping to seek out other offers for 35 days. Should the shipper take another offer, it would have to pay the Bear Stearns unit $7.75 million as recompense.

Deb Shops will be yet another company taken private when the $395 million transaction with Lee Equity Partners closes.

Getting the beat on Medtronic
The largest deal this week involves top-rated Medtronic, the diversified medical device manufacturer which is also the largest maker of pacemakers and defibrillators. It will be acquiring spinal device maker Kyphon in a $3.9 billion deal that will supplement Medtronic's spinal products business. Medtronic treats spinal surgery patients with scoliosis and degenerative disc disease while Kyphon has focused on treating osteoporosis by using small catheter balloons to reposition fractures.

More than 580 investors have rated Medtronic  and 93% see it as outperforming the market. More than one-quarter of those investors are considered All-Stars, meaning they regularly outperform their peers over time, and they, too, endorse Medtronic's prospects going forward.

While top-rated All-Star EBNuc sees their work as "straight out of the sci-fi channel. Cutting edge medical," belizeangaijin speaks from personal experience when endorsing this company:

I had one of their defibrillators for years before a transplant and they are a solid company. Having dealt with heart failure and its HUGE increases in society this company can only thrive in the future as they are the premier ICD (implantable cardiac defibrillator) maker in N.A.

Another investor, DrunkenScotsman, recently noted that in addition to being an industry leader, its valuation was looking attractive as well even if it is actually a little higher then the 18.08 P/E reported by the S&P on June 30.

MDT is now sitting with a P/E of around 19.5, placing it below the average S&P ratio. It has virtually no debt, and commands an enormous 24% return on equity and 22.3% return on total capital. ValueLine has pegged it as one of their favorite company's for both the short term as well as in the coming 3 to 5 years projecting low price appreciation rates of 13% with highs around 20%.

A Foolish offer
Will the merger announcements allow investors to stand tall? What's your take on these deals? Should investors accept the cash or take stock in the new company if offered? Tell the CAPS community whether the urge to merge is good to go or would it be better to fight for independence.

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. Vodaphone is an Inside Value newsletter recommendation. The Motley Fool has a disclosure policy.