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 dealbreakers?

Breaking down the buildup
To help, we'll turn to the 100,000 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 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:


CAPS Rating (5 max)


CAPS Rating

Deal Price

Steel Dynamics (NASDAQ:STLD)


Recycle South


$370 million

Comtech Telecommunications




$216.2 million

Cablevision (NYSE:CVC)




$650 million





$189 million

Hewlett-Packard (NYSE:HPQ)


Electronic Data Systems (NYSE:EDS)


$12.6 billion

Gull Holdings


USANA Health Sciences (NASDAQ:USNA)


$26 per share



DRS Technologies


$4 billion

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

A bear of a time
Although we've seen a number of deals pending, the first quarter's $736 billion is actually the smallest global dollar value amount in six years. The total number of deals is up 14% to more than 9,100 -- but those deals are worth less. This primarily owes to the 41% decline in U.S. deal values, down to $204 billion, though both Russia (up 173% to $33 billion) and China (up 43% to $35 billion) have made up some of the slack.

A healthy dose of going private
Tell me if you've heard this one before: A troubled company's founder makes a bid to take the company private, temporarily inflating its share price, but ultimately never follows through. He then does the same thing again in the future, once more temporarily boosting his stock's worth. No, we're not talking about Parlux Fragrances (NASDAQ:PARL), though majority owner Ilia Lekach has repeatedly floated the possibility of taking the fragrance maker private, only to back out of the deals at the last minute for a variety of reasons.

This time, we're referring to multilevel vitamin-marketer USANA Health Sciences, which is once again enjoying a surge in its stock price thanks to the ruminations of its founder Myron Wentz, who already owns 68% of the company. This marks the second time he's expressed an interest in taking the company private.

USANA has weathered numerous allegations, most notably from Barry Minkow -- a stock trader, previously convicted of fraud, who founded the Fraud Discovery Institute after his release from prison -- who charged the MLM firm with running a pyramid scheme. The SEC investigated the accusations but ultimately closed its books without taking action.

USANA's wistful thinking has all the earmarks of a pump similar to Parlux's, but give the company and Wentz some credit. According to insider-transaction tracking site Form4Oracle, Wentz and Gull Holdings bought at least $3.7 million in USANA stock at market prices between August and September last year. At the time, the stock was trading in the high $30s and $40s, some 50% higher than its current price.

CAPS investors seem evenly divided over whether USANA is a pyramid scheme -- regardless of what the SEC says -- or a viable MLM company that has been beaten down by unwarranted attacks. CAPS player treestock leans toward the latter view, believing that USANA's products dovetail nicely with the health-conscious attitudes of an aging population:

The health industry is gaining intrest with the aging "baby boomers". USANA products fit this profile perfectly. Combined with the income producing possibilities I believe USANA will bounce back to its highest levels within 12 months.

Others, like imadethis, are considerably more skeptical. That said, there's more to this CAPS player's negative opinion than a disdain for multilevel marketing:

I've had friends get sucked into this company by pledging 700-1000 dollars to join in to "invest in their futures by having the opportunity to own a business" by selling Usana products, but in reality, the only money to be made is from getting others to pledge the $700-1000 dollar fee. Just like other MLM schemes, the only people who make money are those at the top and the bottom feeders never rise up in the pyramid to make money. Therefore, more focus is on getting other associates to join instead of selling the product.

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