From tiny acquisitions to massive conglomerate 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 "diworsification" -- weakening a business's core competency 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 89,000 investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new firm's future results, while a high-rated company joining 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

Centene

***

Celtic Group

NR

$80 million

CME Group (NYSE: CME)

****

NYMEX Holdings (NYSE: NMX)

***

$9.4 billion

International Paper (NYSE: IP)

***

Containerboard unit of Weyerhaeuser

**

$6 billion

Time Warner's (NYSE: TWX) AOL

***

Bebo

NR

$850 million

HNI

**

Hickory business furniture unit of Furniture Brands

*

$75 million

JPMorgan Chase (NYSE: JPM)

**

Bear Stearns (NYSE: BSC)

*

$236 million

BMC Software

***

BladeLogic

*****

$775 million

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

A bear of a time
A lot of ink has been spilled over the forced liquidation of Bear Stearns, and more will be forthcoming as shareholders weigh the pennies-on-the-dollar offer the Fed is shepherding through. With no other suitor likely to get the same terms -- or Fed backing -- as JPMorgan, Bear investors need to think whether they would be better off in the House of Morgan or possibly bankrupt.

Let's turn instead to the other big news, CME's bid for the world's largest physical commodities exchange, NYMEX. Rumors have been swirling for a while that NYMEX was looking to partner up with someone. As recently as December, NYMEX Chairman Richard Schaeffer denied that the company was in talks with Motley Fool Rule Breakers recommendation NYSE Euronext (NYSE: NYX), but said it was open to the possibility. With consolidation sweeping the industry, it's not surprising that this deal came about.

CME even makes sense as a partner. Both exchanges have been exploring establishing a trading platform in carbon emissions, a potentially huge money maker since NYSE Euronext began its own. Nymex also has been using CME's electronic trading platform since 2006, a situation that would have made a different suitor think twice before taking control.

The Justice Department might prove a fly in the ointment, requiring both exchanges to separate their lucrative clearing businesses from their futures exchanges. That could be an expensive blow to both NYMEX and CME.

This possibility might be making some investors twitch, as CAPS investor ResearchLover pointed out a few days ago. But should it equate to such a big drop in CME's price? "Jitters today should not translate to a 12% decrease on the value of a growing exchange; Are there perceived problems with the NYMEX [acquisition]?" asked ResearchLover.

Circumstances have also affected NYMEX, as CAPS All-Star MFBriguy noted at the same time, devaluing the total amount of the deal: "Stock is down again on acquisition announcement. The offer is $9.5B, and the market cap is down to about $7.5B."

These are two big-time exchanges, and there's nothing to say the Justice Department's opinion will hold water, but CME has plans for NYMEX, such as eventually eliminating its trading floor, although it wouldn't do so "as long as it is profitable." There could be other changes that don't sit well with many.

A value-added offer
What's your take on these deals? Tell the CAPS community whether the urge to merge is good to go, or whether it's better for the firms involved to remain independent.

JPMorgan Chase is a recommendation of Inside Value. Time Warner is a Stock Advisor pick. NYSE Euronext is a Rule Breakers choice. Snag a free trial subscription for 30 days to any of the Fool's investment services.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holding here. The Motley Fool has a disclosure policy.