From tiny acquisitions to massive combinations, Wall Street's urge to merge remains strong. Some of these deals might generate sought-after synergy, but others could create what Peter Lynch called "deworsification" -- weakening a business's core competence by grafting on wildly unrelated subsidiaries. How can we tell the good deals from the deal breakers?

Breaking down the buildup
To help, we'll turn to the 83,000 investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new company's results, while a high-rated company that joins a lower-rated one may benefit one set of investors more than the other.

Despite troubles in the capital markets, the deals won't stop; they simply might involve more stock and less cash. Here's a handful of recently announced deals and the ratings for each participating company on CAPS' five-star scale:

Acquirer

CAPS Rating

Target

CAPS Rating

Deal Price

Atmel

**

Quantum Research Group

NR

$88 million

Bankrate

**

InsureMe

NR

$65 million

Flotek Industries

****

Teledrift

NR

$95.2 million

Gentiva Health Services

****

Home Healthcare Affiliates

NR

$55 million

Ecolab

****

Ecovation

NR

$210 million

Freescale Semiconductor

NR

SigmaTel (Nasdaq: SGTL)

**

$108 million

GFI Group

***

Trayport

NR

$164 million

Microsoft (Nasdaq: MSFT)

***

Yahoo! (Nasdaq: YHOO)

**

$44.6 billion

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

The deal space is drying up, undoubtedly because capital is harder to come by. In January, there were only about $180 billion of acquisitions announced, which is about 37% lower than last year and more than 50% lower than in December. The year is not off to an auspicious start. February may look better by the end because of the huge Microsoft bid for Yahoo!, the only deal of any appreciable size announced in the past week.

So what do CAPS investors think about these targets and acquirers? It seems most of the companies that have been rated are well-favored by investors, with ratings of three stars or better.

Another semi-interesting bid
The Microsoft bid for Yahoo! will be closely watched and analyzed. It looks like Google (Nasdaq: GOOG) may want to rain on Mr. Softy's parade. The Freescale Semiconductor offer for SigmaTel is also interesting because of what it represents.

Freescale is a privately held wireless chip manufacturer that just might lose one of its biggest customers if Motorola (NYSE: MOT) follows through on plans to sell its flagging cell-phone business. Slumping phone sales had already affected Freescale's own revenue stream and contributed to a layoff of hundreds of employees last year. In 2004, Motorola spun off Freescale, which was taken private last year.

SigmaTel, on the other hand, is a semiconductor maker whose customers have included Apple (Nasdaq: AAPL) and Dell (Nasdaq: DELL) in the past, and Apple today, that could provide expanded opportunities for Freescale. The deal, much like the Microsoft-Yahoo! tie-up, is not set yet because SigmaTel has a 30-day "go shop" window to find other suitors willing to pay more -- although management does like the offer.

More than a year ago, CAPS investor GreedsGood4 outlined the value inherent in SigmaTel at the time. Unfortunately, the market soured on the company, and the stock's price sank. The offer for SigmaTel, although a 68% premium to its closing price when the bid was announced, is still about 32% less than what it was trading for at the time the pitch was made. It seems Freescale ultimately saw the value here:

Positive recent developments include: ... IP strategy is showing modest traction ... with evidence of some recent modest share gains. SigmaTel recently announced a major Chinese customer taking a license to its Moon-Hwang patent (over Actions) ... Sale of division gives SGTL over $130m in cash (versus a market cap of only $200m).

A value-added offer
What's your take on these deals? At Motley Fool CAPS, your opinion is as valuable as the pros'. Tell the CAPS community whether the urge to merge is good -- or whether you think it's better for the companies involved to remain independent.

Dell is a Motley Fool Stock Advisor recommendation. It's also an Inside Value pick, as is Microsoft. Bankrate is a Rule Breakers selection. You can get 30 days of free stock picks from any of the Fool's newsletters with a free trial.

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.