When Cisco Systems (NASDAQ:CSCO) closes a $3 billion acquisition, you know it's a big deal. But a $160 million buyout can be just as big -- when the buyer is a small cap itself.

That $160 million is how much Sigma Designs (NASDAQ:SIGM) is paying for Israeli chip designer CopperGate today. It's a significant price tag when you consider that Sigma's market cap is only $360 million today, and a $160 million deal is a huge commitment for a company that svelte.

The agreement grows in stature when you start thinking about what Sigma is getting for the price: CopperGate is an established power in certain kinds of home networking technologies like the HomePNA standard. CopperGate is setting HomePNA standards alongside heavyweights like Cisco and Motorola (NYSE:MOT).

When you combine Sigma's media processors with CopperGate's networking chutzpah, you get highly capable networked media platforms that should be able to compete with the best that Texas Instruments (NYSE:TXN), Broadcom (NASDAQ:BRCM), and Marvell (NASDAQ:MRVL) can produce. It's a hot market with lots of unrealized potential, and these guys are ready to change how we think about home entertainment.

Mr. Market seems a bit queasy about the acquisition -- Sigma shares are down 6% on the day. But I’m confident this deal will provide Sigma with enough benefits to justify the dilution and hefty cash payout. Sigma always seems to be on the cusp of shooting off into the stratosphere, fueled by telecoms like Verizon (NYSE:VZ) and their IPTV rollouts -- but the pop never comes. CopperGate gives Sigma a whole new arsenal of tasty technologies that could become a growth catalyst in a year or two; give these guys a while to roll their chips together first. But hey, investing in Rule Breakers like Sigma has always called for a big dollop of patience.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Sigma Designs is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.