Whether it's small "tuck in" acquisitions, large megamergers between industry giants, or even one company taking a significant stake in another, the urge to merge remains strong.

We can't always tell the good deals from the bad. While we might get "synergy," we could 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 65,000 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? While deals won't stop, with the loss of easy credit, we can expect to see more stock swaps play a role in financing transactions. 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:


CAPS Rating (out of 5)


CAPS Rating (out of 5)

Deal Price





$350 million

Nelson Steel


Nucor (NYSE:NUE)


$54 million



ITT Industries (NYSE:ITT)


$1.19 billion

Esprit Pharma


Allergan (NYSE:AGN)


$370 million

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

While merger activity has slowed -- according to Dealogic, global merger activity is expected to fall 30% in September -- there's still enough action for investors. The deal tracker also reports that more than $13.3 trillion worth of deals have been made since 2004, making this the richest three-year run since the tech boom at the turn of the century.

Getting the information flow
So what do CAPS investors think about these targets and acquirers? Most of these deals are small ones, for less than half a billion dollars, and most are for small, privately held businesses. In fact, other than Deutsche Telekom's (NYSE:DT) T-Mobile buying SunCom Wireless (NYSE:TPC) for $1.6 billion, the ITT purchase is the biggest deal announced in the past week.

Earning their email stripes
Perhaps one of the more interesting deals is Yahoo!'s acquisition of Zimbra, which at first glance seems like an afterthought. Zimbra is an email platform that may seem redundant at first blush, but will allow the Internet portal to pull multiple rabbits out of a hat. It's still up in the air whether the magic will be enough to change the Motley Fool Stock Advisor recommendation's course.

With 85% of the more than 3,500 CAPS investors who've weighed in on Yahoo! believing the portal will outperform the market, the top bull pitch for the company by wblanchard1 recounts what sets it apart from its rivals.

Yahoo has an incredibly well integrated site that leverages one's information to provide information and services in return. Now that Panama is done, not only will search continue to improve, but much infrastructure is in place to enhance existing businesses. A couple of businesses I'm especially excited about include yahoo music and mobile search. Yahoo radio is becoming very popular quickly because of [its] ability to introduce people to new music that fits their existing tastes. Combine this with their popular new mp3 player and there is a potential for huge upside. Yahoo is also one of the first to the mobile search space and could potentially steal some google market share if they can capitalize on mobile. Overall, yahoo has many strong businesses, and an infrastructure that will now allow it to improve upon and integrate all their businesses.

That's underscored by nbonaddio, who lists additional areas of superiority:

Don't fall into the misconception that GOOG is killing YHOO. YHOO has top 3 market share in over 25 markets; GOOG has approximately 3. YHOO still holds a dominant position in mail, and is across the board in great position with Personals, Sports, TV, Maps, Answers, Mobile, Finance, Games, and Travel all with persistent and increasing top 3 market share.

A Zimbra acquisition seems to up the ante just a little bit more.

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 professionals'. Tell the CAPS community whether the urge to merge is good to go, or whether it would be better to fight for independence.

Yahoo! is a recommendation of Motley Fool Stock Advisor. A 30-day risk-free trial is available by clicking here, giving you full access to see why the Internet portal continues to be an investor favorite.

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.