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 "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 110,000 investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new company, 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


CAPS Rating

Deal Price

Gull Holdings


USANA Health Sciences (NASDAQ:USNA)


$459 million

Duke Energy (NYSE:DUK)


Catamount Energy


$240 million

MDU Resources (NYSE:MDU)


Intermountain Gas


$328 million

Liberty Media (NASDAQ:LINTA)


Celebrate Express


$31.1 million

News Corp. (NYSE:NWS)




$970 million



Photon Dynamics (NASDAQ:PHTN)


$290 million

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

A smart idea
USANA Health Sciences, which markets vitamins, is back in the mix again: Its founder, Myron Wentz, upped his offer for USANA after the board rejected his previous bid. Yet will the new $28-per-share offer -- adding $33 million to the price, about an 8% increase over his previous offer -- be enough to sway the board? Wentz has said this is his "best and final" one because debt obligations prohibit any further increases.

While the critics of USANA are legion, often panning the multilevel marketing business model, its proponents believe that it's the actual business of selling healthful products that will make it a success once again. Shares of USANA trade for about half of what they did about a year ago, but CAPS investors like treestock are counting on demand to return it to its glory days:

The health industry is gaining [interest] 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.

Creature feature
Utility operator Duke Energy has made recent overtures to the solar industry, and if they pan out, they would certainly help grow its carbon footprint. Duke Energy is seeking to also reduce the effects of its customers' energy use by teaming up with a local nonprofit organization to subsidize the purchase of power from renewable sources such as solar and wind.

Investors remain bullish about Duke's prospects. As CAPS player slimpickins2 notes, electricity is not going away anytime soon:

Looks cheap right now, steady growth rates, and electric power generation is not going anywhere, it is not tied to oil, so I like anything invloved with electric, because if anything electric power is going to become used more as oil becomes increasingly scarce and environmental concerns continue to move to the front of the political agenda.

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 companies involved to remain independent.