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 85,000 investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new, melded company, while a highly rated company joining 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

Actuant

*****

Superior Plant Services

NR

$57 million

United Technologies (NYSE: UTX)

*****

Diebold (NYSE: DBD)

**

$2.63 billion*

Cardinal Health (NYSE: CAH)

****

Enturia

NR

$490 million

Nucor (NYSE: NUE)

****

The David J. Joseph Companies

NR

$1.44 billion

Broadcom (Nasdaq: BRCM)

***

Sunext Design

NR

$48 million**

Global Cash Access (NYSE: GCA)

*

Certegy Gaming Services

NR

$25 million

Sources: Company press releases; CAPS ratings courtesy of Motley Fool CAPS; NR = not rated.
* Diebold has rejected United Technologies' bid of $40 per share.
** Includes licensing payments to Sunext Design's former parent.

So what do CAPS investors think about these targets and acquirers? Seems they generally approve of most of the companies, as their three-star or better ratings suggest. But these are relatively small deals that should not dramatically impact the bottom lines of many of the companies.

A broad-based brush
Broadcom's acquisition of fabless semiconductor company Sunext Design broadens the chip maker's Blu-ray technology offerings. Now that the format battle between Blue-ray and HD-DVD is over, with Toshiba having announced it will stop making competing-format players, the proliferation of the next-generation DVD format can begin. Broadcom already employs some industry-leading technology here. The acquisition, combined with a license from Sunext's former parent for optical disk reading and writing, should allow it to expand its capabilities.

However, the real heart of Broadcom's growth may be in the more competitive landscape of wireless and mobile business. Having won Nokia's (NYSE: NOK) chip design, the cell-phone market will be a primary driver for revenue. Yet expectations for meeting that demand have been postponed into 2009, showing that Broadcom still has hurdles to climb. However, with stock prices down more than 50% from the high just a few months ago, this chip maker seems cheap.

With nearly 90% of CAPS investors who weighed in thinking Broadcom can beat the market going forward, it seems to have a groundswell of support. Much of the enthusiasm is based on the leading chip technology it develops, and many, like CAPS All-Star chk999longonly, see the sell-off in shares as overdone.

It remains for investors like CAPS player Statman42 to note that Broadcom has been investing heavily in the future. While short-term results may be affected, it stands to reap the benefits later on.

In a follow-up note last month to his initial short pitch of a month earlier, Statman42 acknowledged calling the bottom a bit prematurely, but still considers Broadcom's technology best-of-breed:

I decided not to cut the loss [from getting in early] on it because ... in addition to having the best, most energy-efficient 3G chips, they should also get a big [boost] in late 2008-2009 from: their HD video processing chips ... their video and graphics chips in phones, and various broadband chips with increased movie downloading. Unfortunately, they are now the victim of momentum short selling due to a combination of decreased short-term margins due to increased R&D, production delays, recession fears, etc.

A value-added offer
What's your take on these deals? 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.

Actuant is a recommendation of Motley Fool Hidden Gems. Diebold is an Inside Value selection. You can get 30 days of access to any of the Fool's investment newsletters by clicking here.

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