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

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 for the best returns. A combination of two companies with high CAPS ratings should bode well for the new company's 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 are a handful of recently announced deals, and the ratings for each participating company on CAPS' five-star scale:


CAPS Rating


CAPS Rating

Deal Price

Banco Santander (NYSE:STD)


Sovereign Bancorp (NYSE:SOV)


$1.9 billion

Elliot Associates


Epicor Software


$529 million*





$8 million



Lore International


Terms not disclosed

Mercury General


AIS Group of Aon (NYSE:AOC)


$120 million

Microchip Technology (NASDAQ:MCHP)




Terms not disclosed

CAPS ratings courtesy of Motley Fool CAPS; NR = not rated. *Unsolicited takeover bid.

While I was tempted to include all the top banks forced into giving up an equity stake to the government, we'll stick with the more conventional merger arrangement taking place in the equity markets.

A merger of equals?
Intel delivered rather upbeat guidance with third-quarter earnings Wednesday, making some analysts wonder whether CEO Paul Otellini was setting himself up for the same fall that Corning (NYSE:GLW) executives experienced this year before having to cut projections on revenue and margins. Intel officials said that not only do they think the company will report revenues in line with analyst predictions, but that they see margins holding steady, inventory remaining stable, and demand for notebook computers -- and their Intel-backed chips -- remaining high.

With Intel's commanding market-share lead over rival Advanced Micro Devices (NYSE:AMD) in the notebook segment, CAPS member tuckerboreo finds it to have a large reward-to-risk ratio.

Market leader, great products, huge cash hoard. Very cheap at $15. I see 30% upside within a year.

Cashing out
Perhaps it was just trying to head off the bad news in its pre-announced third-quarter earnings report, but Sovereign Bancorp agreed to allow Banco Santander, which already owns a 24% stake in Sovereign, to buy the rest of the company in a deal that gives current shareholders no premium over its market price. Based on the value of the partial shares Sovereign investors will receive from the Spanish bank, the price equaled $3.81 a share, the same price shares were trading at the day before the deal was announced.

CAPS member LimoDriver1971 finds Santander's buyout offer a good deal.

One of the best run Spanish banks wants to run the whole shooting match, after for many years just being a silent partner. Good deal-it saves Sovereign from approaching bail out status and that will always look good to the banking public.

That would seem to jibe with what top-rated CAPS All-Star JBouchard had to say about Santander, which seems pretty cheap in its own right.

Spanish bank that did not partake in the toxic assets business. Now they're in a strong position and they're out shopping.

Graham formula gives a 50% discount on fair value, and they pay out a very nice 6.7% dividend.

A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. And while you're there, you can start your own research on these or other stocks. 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. There's more than you think.

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