J. Crew bought out, who's next?

Apparel retailer J. Crew (NYSE:JCG) just agreed to be acquired by two private equity firms for about $3 billion, or $43.50 per share. Mergers and acquisitions (M&A) are on the rise as investors and corporations are putting their excessive cash holdings to good use.

(JCG stock closed at $37.65 per share at Monday's close just prior to the takeover announcement).

In some cases, it's just a matter of scooping up bargains that Wall Street has neglected. In other cases, investors deem a company to be inefficiently (or wrongly) managed, so they buy it out, put in place better policies, and thus create better value.

Takeovers can sometimes trigger a wave of copycats in the same sector because similar companies are perceived to be also undervalued or inefficiently managed.

J. Crew's takeover has boosted the stock prices of several other retailers, possibly because this acquisition -- and that of Gymboree (NASDAQ:GYMB) earlier -- is stoking interest in the sector. Jim Cramer, a former hedge fund manager and host of CNBC's Mad Money, thinks the retail sector could see more M&A.

Many retailers are selling at ridiculous prices to their long-term growth rates, said Cramer in an MSN Money commentary.

Stocks that rallied in hopes of being the next buy-out target include Staples (NASDAQ:SPLS), Urban Outfitters (NASDAQ:URBN), Big Lots (NYSE:BIG), Abercrombie & Fitch (NYSE:ANF), J.C. Penney (NYSE:JCP), RadioShack (NYSE:RSH), Gap Stores (NYSE:GPS), Macy's (NYSE:M), and Limited Brands (NYSE:LTD), according to Cramer.

Of all the above-listed stocks, Big Lots and Staples rallied the most in the last two days, gaining 4.29 percent and 3.77 percent, respectively, so the market certainly thinks they're possible targets.

Cramer, however, is bearish on Big Lots in general and would only make a Staples buyout contingent on the shrinking of Office Depot (NYSE:ODP), one of Staples' competitors.

He thinks the most logical takeover target is Limited Brands (NYSE:LTD), which is cheaply valued, could be easily broken up, and has good potential to grow.