Whether it's small "tuck in" acquisitions, megamergers between industry giants, or even one company taking significant stakes 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 can just as easily get what master investor 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 separate the good deals from the dealbreakers. We'll see how the 74,000 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, 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 five stars:

Acquirer

CAPS Rating

Target

CAPS Rating

Deal Price

IDEX

*****

Nova Technologies

NR

$158 million

Oritani Financial

NR

Greater Community Bancorp

NR

$187 million

Electronic Data Systems (NYSE:EDS)

**

Saber Holdings

NR

$420 million

Qualcomm (NASDAQ:QCOM)

***

Firethorn Holdings

NR

$210 million

Regeneration Technologies

***

Tutogen Medical

****

$263 million

Constellation Brands (NYSE:STZ)

****

Wine business of Fortune Brands

***

$885 million

International Business Machines (NYSE:IBM)

***

Cognos (NASDAQ:COGN)

****

$5 billion

Dolby Labs (NYSE:DLB)

*****

Coding Technologies

NR

$250 million

Catterton Partners

NR

Restoration Hardware

*

$267 million

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

While merger activity ticked up in October to $73.6 billion, a 37% increase from the month before and perhaps an indication that the bottom has been reached, the first 10 months of 2007 brought more than $4 trillion in deals. Yet as the credit crunch deepens, a number of investors are looking to back out of deals that had been previously announced. Most recently, Cerberus Capital Management is trying to back out of its proposed acquisition of United Rentals (NYSE:URI).

So what do CAPS investors think about these targets and acquirers? While these deals are not particularly large, just as with some others we've seen in recent weeks -- only IBM's acquisition of Cognos exceeds $1 billion -- most of the companies happen to be favored by investors, with most of the publicly traded companies earning ratings of three stars or more.

A deal that sounds good
Top-rated Dolby Labs has made an acquisition that should help it maintain its industry-leading position. Its purchase of Coding Technologies, the Swedish maker of audio compression technology for mobile and Internet applications, points to the way Dolby plans on achieving its next phase of growth.

More than 1,700 players have rated the Motley Fool Stock Advisor recommendation, with 98% of them predicting it will outperform. CAPS All-Stars, those players with the best investing records, are nearly unanimous with an outperform endorsement. The market researchers and analysts at Netscribes think Dolby is the (sound) wave of the future, particularly as it casts about for leading-edge innovations.

It is the company's continuous thrust for introducing innovative and [groundbreaking] technologies that will act as the major growth driver for the company in the future. The Dolby Digital Plus technology for Next-Generation Broadcast Systems and strong adoption of Dolby by latest technologies like Blu-[Ray] and HD TV sets, augers well for the company, and will enhance its dominance in the sound technologies market. Looking ahead, though the company's stock has risen by over 75% during the past year, considering its dominant technology, leading position in the industry, and sturdy future outlook, Dolby can be considered as a healthy investment proposition. [Editor's note: Share price change as of April 27; current one-year share price increase is 69%.]

Or as CAPS All-Star investor Fuskie puts it, "If it makes a noise, it has Dolby technology in it. With HD, [Blu-ray] and digital prices coming down to average consumer levels, the demand for quality audio will grow."

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, or if it would be better to fight for independence.

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Fool contributor Rich Duprey owns shares of Dolby 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.