Usually when one company acquires another, the share price of the acquired business increases while the acquirer’s stock value decreases to reflect the premium paid by the buyer to get the deal done. However, every once in a while a transaction makes so much sense that both company’s see their share prices rise, such as the situation involving last week’s rumor that QUALCOMM (QCOM) has reached an agreement to acquire NXP Semiconductors (NXPI).

[For more thoughts on this transaction from the NXPI perspective, please see Ben Shepherd’s article from today’s edition of Breakthrough Tech Weekly.]

Shares of NXPI jumped more than 20% last week on the news, while QCOM also rose by nearly 10% at the same time. That’s a combined increase in market capitalization for the two companies of roughly $16 billion in just three days, during a period of time when the tech-heavy NASDAQ Composite barely budged. So far, just about everybody seems to like this deal.

This type of transaction is consistent with our concept of innogration, which mandates that tech companies complement their internal process of innovation with the integration of external resources to create a market leading product. In this case the semiconductors produced by NXPI will enable QCOM to migrate more quickly away from low-margin smartphones into the emerging smart car market, while expanding its capacity in the rapidly evolving IoT (“internet of things”) sector.

This latest development marks a huge turnaround in the fortunes of QUALCOMM, whose share price dropped to the low $40s at the beginning of this year from above $70 only two years ago. At that time the company’s new senior management team was putting out fires in China over its balky Snapdragon processor for smartphones, while attempting to settle an allegation by Chinese regulators that it was incorrectly assessing royalty fees for the use of its intellectual property.

But all of that now seems a distant memory, as the company has patched up its relationship with China and seemingly solved the Snapdragon problem with its Chinese manufacturers at the same time (isn’t if funny how that works after you pay a $975 million fine and agree to lower your royalty rates on patents used in China in the future?).

We never said that innogration is not a messy process, but QUALCOMM is living proof that the right deal can quickly reverse the fate of a company once given up for dead not that long ago. The same holds true for Western Digital (WDC), which also managed to salvage its share price recently by proving its costly acquisition of SanDisk would immediately improve its financial performance (see “Western Digital LEAPS Again”).

QUALCOMM currently earns a score of 6 (on a scale of 0 – 10) according to my IDEAL Stock Rating System, meaning it is now pretty close to fairly valued (the average score for the entire S&P 500 Index is currently a little over 5). You can see the IDEAL scores for every tech stock in the S&P 500 Index in our “Smart Tech 50” data table. As a general rule, companies with high IDEAL scores are more likely to be future buyers of other companies, while those with low IDEAL scores may be forced into selling out.

We expect to see more deals of this nature in the coming year, especially if a truce with tax regulators can be reached that would allow big tech companies to bring their enormous hoards of cash back into the U.S. that have been accumulating off-shore for the past several years. If that happens, the rate of M&A (merger and acquisition) activity in the tech sector could easily double or triple as the process of innogration is fueled with an almost limitless supply of money.