From tiny acquisitions to massive conglomerate combinations, Wall Street's urge to merge remains strong. How can we tell the deal makers from the dealbreakers?

Breaking down the buildup
To help, we'll turn to the 115,000-plus investors in Motley Fool CAPS. Our data suggests that top-rated stocks offer the best opportunity to capture the best returns. 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:

Acquirer

CAPS Rating

Target

CAPS Rating

Deal Price

Broadcom (NASDAQ:BRCM)

***

Advanced Micro Devices' DTV chip unit

**

$193 million

Cisco (NASDAQ:CSCO)

****

PostPath

NR

$215 million

Nuance Communications (NASDAQ:NUAN)

****

Zi

NR

$40.4 million

Nucor (NYSE:NUE)

*****

Ambassador Steel

NR

$185 million

Precision Drilling (NYSE:PDS)

*****

Grey Wolf

*****

$2 billion

Ricoh

NR

Ikon Office Solutions (NYSE:IKN)

**

$1.6 billion

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

A merger of equals?
With AMD struggling to compete against stronger rival Intel (NASDAQ:INTC), the need to return to profitability is prompting it to exit non-core businesses. That's OK by Broadcom, which will gain immediate heft in the digital TV market. CAPS member colonelnelson sees the full array of products the chip maker offers as a strong platform for growth.

Convinced by a pitch from Sandra Ward of Barron's weekly, I believe that [Broadcom] will continue to grow and prosper from its increasing market share in the "smart phone" market.

[Broadcom's] touch-screen controller chip is used in Apple's iPhone and its other chips are used in Motorola cable boxes, Netgear wireless routers, Bluetooth devices, Blu-ray players and digital TV.

[Broadcom] recently blew by performance expectations in Q2 2008, and their growth prospects remain strong. Despite being debt free and generating excellent free cash flow, [Broadcom] looks very cheap at 16 times earnings. Historically, it has traded around 24 times earnings. With much of their R&D costs in the books, the bottom line will continue to improve, and [Broadcom] could really fly. OUTPERFORM.

Another day, another Nuance Communications merger. The voice-to-text specialist has made a cottage industry out of buying up smaller players in the speech recognition field. Most recently it sought to pick up bit player Zi in an all-cash deal offering a 150% premium for the Canadian company. The Motley Fool Hidden Gems recommendation was affronted when Zi rejected the bid and turned around and filed not one but two patent infringement lawsuits against the text messaging firm.

Yet part of the result of the buying binge has been an explosion of shares with significant dilution. CAPS member ivstaline sees the compounded average growth rate of 19% in shares outstanding as a poor way to reward investors: "If the past gives any clues about the future, what better way of thanking the shareholders for their patience than by drowning them with a fresh supply of new shares."

Back in May CAPS member Coastie49th recognized the value of Ikon Office Solutions as a takeover target because of its position as a seller of Canon and Ricoh products.

IKON is well positioned for a takeover. They are the largest independent distributor of Office Products in North America. They sell 60% of the total North American sales of Canon's office product line. They also sell a significant amout of Ricoh's also. They are a turn key opportunity for a distribution channel that spans North America and Europe. Put that together with a great product line and you have instant distribution with a well established selling machine.

This will happen, when is the answer.

A value-added offer
What's your take on these deals? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. 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.

Precision Drilling is a Global Gains selection. Nuance Communications is a Hidden Gems pick. Intel is an Inside Value recommendation. Apple and Netgear are Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

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