Mergers vs. acquisitions

Q. What’s the difference between a merger and an acquisition? — G.L., Sherwood, Oregon

A.

Both involve the joining of two companies, but there are some key differences. In general, two companies merge when they’re somewhat similar in size, together forming a new company. It will be a new legal entity, typically with a new name and ticker symbol.

With an acquisition, a larger company typically buys and takes control of a smaller one. The purchased company ceases to exist on its own, and no new company is formed. Acquisitions happen much more frequently than mergers. While mergers are friendly and a joint effort, acquisitions can be hostile.

Famous mergers include Exxon and Mobil (forming Exxon Mobil) and Citicorp and Travelers Group (forming Citigroup). Famous acquisitions include Amazon.com acquiring Whole Foods Market, and Walt Disney buying Pixar. Some acquisitions, such as when

CVS Health bought Aetna, are referred to as mergers, in large part to honor the acquiree and let it save face. There are some key differences in how the business world uses the terms, too.

Q. How can a stock start trading in the morning at a much higher or lower price than it closed at the day before? — T.N., Buffalo Grove, Illinois

A. There was likely some news released after the market closed that caused buy or sell orders to pile up all night.

If Buzzy’s Broccoli Beer (ticker: BRRRP) closes at

$50 on Tuesday but opens on Wednesday morning at $43, it might have announced the loss of a major customer or posted a disappointing earnings report.

If BRRRP opens trading much higher, it might have announced some good news — or perhaps it’s being acquired at a premium price.

Fighting junk fees

Together, we’re all forking over tens of billions of dollars in “junk fees,” said Federal Trade Commission chair Lina Khan, calling them “unexpected and unnecessary.” The FTC also called them “hidden and bogus.”

They may appear on bills for cable or internet service, on charges for lodging or on bank statements. (Many banks charge “inactivity” fees, for example, for no apparent reason.) Surprising fees also appear when you’re ordering food delivery or buying concert tickets, and even when you’re buying a home.

Marketing professor Jeff Galak at Carnegie Mellon University’s Tepper School of Business has referred to “fee-flation,” noting, “Fees are a way to raise prices without raising prices.” Hidden fees can also make it hard for consumers to shop around for best prices.

Consumers needn’t despair, thinking that nothing can be done about excessive or junk fees. The FTC, joining with other entities — such as the Consumer Financial Protection Bureau, the Federal Communications Commission, the Department of Housing and Urban Development and the Department of Transportation — is working to prohibit many junk fees.

Indeed, the FTC recently rolled out a proposed rule to prohibit many “hidden and falsely advertised fees.” It would, in the words of the FTC, “ban businesses from running up the bills with hidden and bogus fees, ensure consumers know exactly how much they are paying and what they are getting, and help spur companies to compete on offering the lowest price. Businesses would have to include all mandatory fees when telling consumers a price, making it easier … to comparison shop for the lowest price.”

The FTC estimates that, with the proposed rule in place, consumers may save more than 50 million hours annually in comparing prices for live event tickets and short-term lodging alone. The proposal is not yet law, and the FTC is seeking comments from consumers. If you’d like to contribute your thoughts, visit FTC.gov and click on “Submit a public comment.”