Buyout or Sellout?

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 105,000 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:

Source: Company press releases and Motley Fool CAPS. NR = not rated.

A bear of a time
Although we've seen a number of deals pending, in fact the first quarter's $736 billion came from the biggest quarterly decline in six years. The total number of deals are up 14% to more than 9,100 deals, they're just worth less. The main reason is the 41% decline in U.S. deal values down to $204 billion, though some of the slack has been made up in both Russia (up 173% to $33 billion) and China (up 43% to $35 billion).

Mobile wizardry
It's not exactly on the order of Gandalf defeating Saruman before the Tower of Isengard, but Verizon was finally able to summon the wizard and defeat Chad, the Alltel commercial character who promotes the phone company's circle of calling friends. Verizon will become the largest wireless carrier when it absorbs Alltel's 13 million regional customers, giving it great scale and leverage in the industry while also putting it firmly ahead of AT&T (NYSE:T).

While Verizon's wireless network gets generally high marks from investors, it is the telecom's fiber-optics network that has many seeing it as ultimately beating the cable companies at their own game. Top-rated CAPS All-Star giantSwan, for example, feels the consumers' need for high-speed connectivity will have them gravitating toward Verizon's FiOS system.

I think Verizon is a fantastic long-term play here. They focus heavily on infrastructure, not external devices that interact with their network. This infrastructure will pay off in the future... We are moving to life where we cannot live without high speed mobile data connectivity. The big wireless telecom companies are well positioned to provide these services for years to come.

Similarly, All-Star investor drjohn432 is heartened by the fact that Verizon invests in its infrastructure in an effort to return value to the company and the shareholder.

This is one of the premier communication companies in the world and has great infrastructure for both fixed line and wireless apps. It also is stockholder friendly and raises its dividend on a regular basis. Should go up for several years.

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 to go -- or whether you think it's better for the firms involved to remain independent.