5 More Companies Getting Taken Out

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-worse-ification": 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 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.

Could troubles in the capital markets finally be taking their toll in the M&A arena? Perhaps so, since the pace and size of merger activity took a breather this week. 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 the maximum five stars:

Despite the merger slowdown, there's still enough action. In fact, private equity has invested more than $900 billion in mergers and acquisitions over the first six months of the year.

Getting the information flow
So what do CAPS investors think about these targets and acquirers? A few small, private companies are getting taken out by larger rivals -- the Citrix Systems acquisition being the more notable -- while Midwest Air is going private. Perhaps the more curious merger is online and on-campus education provider Apollo's purchase of online advertising network Aptimus. Look for Apollo to use the network to increase awareness of its offerings.

The devil is in the micro details
The biggest of the deals highlighted this week might also be the most interesting. RF Microdevices' buyout of Sirenza allows it to move further afield from chips for mobile phones, since its target has itself made acquisitions that let it make RF components for everything from wireless devices to broadband boxes. While 3G handsets might be the near-term driver for RF's growth, Sirenza gives it an open door to aerospace and military applications, as well as home-based broadband access.

The deal, announced on Monday, gives Sirenza investors a 17% premium for their shares in a mix of cash and stock. Sirenza shareholders will receive 1.7848 shares of RF's stock, as well as $5.56 in cash, for each share they own. The deal will create the largest radio frequency company, according to RF Microdevices. With both companies garnering a three-star rating from CAPS investors, this merger could be a good fit.

Earlier this year, industry analyst and market research Netscribes penned the top Bull pitch for RF.

The company's two largest customers shipped nearly 60% of the world's phones during the quarter including the top five handset manufacturers shipping approximately 240 million, approximately 86% handsets of the total market. Again, this plays into RFMD's strength as it has excellent customer relationships with this group and a growing RF analog product portfolio that addresses their specialized needs. Moreover, the platform approach enabled by its TOTAL RADIO solutions puts a greater emphasis on technology road maps and manufacturing scale, because these platforms span across many models and can last for many years. These two requirements alone, places RFMD significantly above all of its peers.

Industry analysts are currently forecasting handset unit growth of approximately 10% with expected continued growth in Wideband CDMA handsets. This is a positive trend for RFMD because these phones contain at least two PAs and it is the world's leading supplier of cellular PAs with market share of approximately 50%. These trends are expected to put RFMD, ahead of its peers on the growth front.

But as the Sirenza deal makes clear, RF is thinking beyond just the immediate future of mobile communications. Perhaps executives at the company read CAPS All-Star RJSolo's prescient top pitch in December:

After a number of acquisitions, this maker of components for cell phone & digital boxes is poised to show increased earnings ... increase[d] stock prices will follow. Potential takeover target.

A value-added offer
What's your take on these deals? Should investors accept the cash or take stock in the new company if offered? Only at Motley Fool CAPS is your opinion as valuable as the pros. 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. The Motley Fool's disclosure policy is just fine staying single, thank you.