Whether through small "tuck in" acquisitions, large megamergers between industry giants, or even taking significant stakes in another company, the urge to merge remains strong.

We can't always tell the good deals from the bad. While we might get "synergy," we can just as easily get what investing legend Peter Lynch called "de-worse-ification": weakening an existing business's core competency by grafting on wildly unrelated subsidiaries.

Breaking down the buildup
Let's take a shortcut to decipher the good deals from the dealbreakers. We'll see how the 60,000 investors in the Motley Fool CAPS universe rate the companies hooking up. If two highly rated companies seek a better life together, we figure they might also do better down the road. Conversely, if one company is highly rated and the other low, we might expect one set of investors to come out ahead, since those ratings forecast investors' sentiment of each firm's future prospects.

Merger activity remains high this week. Here's a handful of some of the recently announced deals, and the CAPS community's ratings for the players involved on its scale of one to a maximum five stars:


CAPS Rating


CAPS Rating

Deal Price

Club Penguin

Not rated

Disney (NYSE:DIS)


$350 million

ASAP Software

Not rated



$340 million





$4.4 billion

Dow Jones (NYSE:DJ)


News Corp. (NYSE:NWS)


$5.6 billion

NetSpend Holdings

Not rated

Capital One Financial (NYSE:COF)


$700 million

CAPS ratings courtesy of Motley Fool CAPS.

Despite the thought that mergers may slow, there's still plenty of action, including private equity. In fact, private equity has invested more than $900 billion in mergers and acquisitions over the first six months of the year.

While the boom continues, public company cash hordes are also fueling M&A expansion. According to Cullen High Yield Value Equity, the companies on the S&P 500 had $1.2 trillion in cash on their balance sheets, accounting for 21% of their market value -- and apparently burning a hole in their collective pockets.

Getting the information flow
So what do CAPS investors think about these targets and acquirers? The big news for the week had to be Rupert Murdoch's News Corp. getting the controlling Bancroft family's approval to acquire Dow Jones, the owner of The Wall Street Journal, Barron's, and other financial news and media properties, in a $5.6 billion deal. The king of tabloid news will now be running one of the more respected and respectable names in journalism.

The farmer in the Dell
Although it's the smallest deal highlighted, Dell's acquisition of ASAP Software might be the most interesting transaction, particularly in conjunction with Dell's other purchase, SilverBack Technologies.

From the time it burst onto the PC market, Dell has sold computers directly, avoiding retail channels. That distinction helped Dell top the industry. Yet the direct market has slowed, and Dell has found advantages in dipping its toes into the retail channel, too. It's opened a couple of stores, much like Apple, and sealed a deal to sell PCs in Wal-Mart, too. In addition, Dell has been working closely with value-added resellers (VAR), selling them components at wholesale prices. Although it hasn't highlighted these relationships, the ASAP and SilverBack acquisitions will allow Dell to get more VARs as clients.

ASAP, like Dell, is one of the top "large account resellers," with $1.5 billion in sales. Its software licensing technology will let Dell keep its pricing aggressive to attract more customers. For example, it recently ran a promotion selling licenses on a number of Microsoft programs at cost. That's a direct challenge to other VARs less well-equipped to compete with Dell ... but by becoming clients through ASAP, those rivals would enjoy similar benefits. Still, the deal might also alienate some VARs that remain suspicious of Dell's commitment to channel selling.

Dell isn't high on CAPS investors' lists, either. Our Foolish community has bestowed a two-star rating on the PC seller. Bulls like stockpitcher like the retail angle: "Move into Retail will improve sales tremedously. Should have been done long ago."

But bears are wary of Dell's channel strategy, as travGT notes:

Hammered by an outdated sales strategy and caught between HP and IBM. It will take a long time for Dell to figure out how to effectively build and service the channel. The channel will be very wary of Dell's approach due to their history. HPQ and IBM have a competitive advantage in upscale offerings sold via the channel AND direct.

Another CAPS player, blushark, doesn't put much stock in Dell's pairing up with Wal-Mart, because of the changing ways in which people buy their computers:

Dell was a successful company in the past because of its ability to keep its inventories small, and its PCs customizeable. Dell's move into Walmart, along with Hewlett-Packards move to the No. 1 spot, shows a paradigm shift toward the way the general public buys PCs. Sure, the corporate side of the house looks good, but long term I see companies needing to purchase computers less frequently, and will get the processing power they need for less money.

A value-added offer
What's your take on these deals? Should investors accept the cash, or take stock in the new company if offered? Only Motley Fool CAPS makes your opinion as valuable as the professionals'. Tell the CAPS community whether the urge to merge is good to go, or whether it would be better to fight for independence.

Dell and Disney are Motley Fool Stock Advisor recommendations. Dell is also a recommendation of Motley Fool Inside Value, as are Microsoft and Wal-Mart.

Fool contributor Rich Duprey owns shares of Wal-Mart, 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's disclosure policy stands alone.