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 125,000-plus investors in Motley Fool CAPS. Our data suggest that top-rated stocks offer the best opportunity to capture the best returns. A merger 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:

Acquirer

CAPS Rating

Target

CAPS Rating

Deal Price

Vector Capital

NR

Aladdin Knowledge Systems (NASDAQ:ALDN)

***

$160 million

Medtronic (NYSE:MDT)

*****

Ablation Frontiers

NR

$225 million

Abbott Labs (NYSE:ABT)

*****

Advanced Medical Optics (NYSE:EYE)

**

$1.36 billion

Medicines Co.

**

Targanta Therapeutics

*

$42 million

Sequenom (NASDAQ:SQNM)

**

EXACT Sciences

*****

$41 million

Brokerage unit of Morgan Stanley (NYSE:MS)

**

Brokerage unit of Citigroup (NYSE:C)

**

$2.7 billion

Outdoor Channel

*

Winnercomm

NR

undisclosed

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

Into it deep
The banks aren't using the TARP (Troubled Asset Recovery Program) funds to increase their lending much, are they? But boy, have they found a way to strengthen their industry position by using tax dollars to buy up assets. Morgan Stanley is looking to use part of its $10 billion cash infusion to form a joint venture with Citibank's Smith Barney unit. Citibank is under pressure to stem losses and is breaking itself up by selling off the underperforming parts of its $2 trillion in assets.

Citigroup seems to be making out well on the deal. Not only does it get $2.7 billion in cash from Morgan Stanley, it also keeps a 49% ownership stake in the joint venture while getting to book about $10 billion in pre-tax gains. With the government having shoveled $45 billion into the banking giant, making it the company's largest shareholder, it should be happy to be reaping some gains.

However, CAPS member phil27607 sees the breakup of Citigroup as a desperate, last-ditch attempt at saving itself from oblivion.

Reorg is a desperate move. Nothing short of more bailout money will keep them afloat, and that's going to decimate investors in the short-term.

Playing in the margins
The shares of clinical diagnostic test maker Sequenom have nearly tripled in value in the past year, which is a pretty heady gain for any stock during these times. While the price reflects investor sentiment about the potential for its non-invasive Down's syndrome test, investors should also use care, because any setback, even minor, could send the stock into a tailspin.

CAPS member smith2668 sees the company's product profile, along with the Down's syndrome test, as a reason to believe Sequenom can continue to grow.

The company sells DNA analysis platforms and will roll out its exclusive noninvasive highly accurate blood test for fetal Downs Syndrome by June 2009. Lots of Call activity at the moment...

With patents expiring by the bunch from 2010 to 2015, we should become accustomed to more pharmaceutical buyouts in the near future. CAPS All-Star angreemunkee writes that according to its metrics, Abbott Labs appears to be a bit richly valued, but the dividend is pretty safe.

Despite somewhat high earnings multiples, Abbott is a promising buy. The high earnings multiples are to be expected to a degree, as it is quite standard for health-care stocks at the moment.

Its quick ratio is a tricky number to understand, and may appear to be worse than it is unless you give it an extra look. It's in the bottom quartile of the industry, but the industry's quick ratios are very close together. ...

The last year was very good for Abbott. They showed gargantuan earnings growth in both the last quarter and the trailing twelve months. Despite having a somewhat bland dividend for today's market, it is one of the most sustainable dividends you'll find. In addition, their 5-year dividend growth is decent.

A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. And while 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.