Investors are applauding a deal announced Monday afternoon between two makers of tools. Stanley Works (SWK) will acquire Black & Decker (BDK) in an all stock deal according to DealBook. While the agreement called for Black & Decker to be acquired for $4.5 billion in Stanley stock at the time the market closed Monday, the price of the deal is rising because Wall Street loves it so much.

How so? The deal is a stock swap which means that Stanley will exchange 1.275 shares of its stock for each share of Black & Decker. That was a 22 percent premium over Friday's market close. Since the deal was announced, however, the stock of Black & Decker surged over 20 percent, to $57.10. And in a really unusual happening, even Stanley's shares rose 4 percent, to $47. That gain means that Black & Decker shares are worth even more, according to DealBook.

When the deal closes in the first half of 2010, Stanley shareholders will own 50.5 percent of the the combined company, while Black & Decker shareholders would own around 49.5 percent.

Behind investor's enthusiasm is the possibility of significant cost savings enjoyed by the combined company. The two companies expect the merger to save $350 million a year, mainly because their operations complement each other -- Stanley sells hand tools and construction equipment, while Black & Decker makes power tools.

It looks to me like this is an old-fashioned strategic merger that will make the combined companies stronger. Now all they need is an economic recovery to spur a boost in demand for their combined product line.

Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.