With market turmoil creating sudden, unanticipated opportunities for mergers and acquisitions, companies are closing transactions faster than ever, professional services firm Towers Perrin found in a recent analysis.

Towers Perrin analyzed more than 500 global acquisitions in 2007 and 2008 and found that transactions are now being completed almost twice as quickly as they were a year ago.

The average duration from announcement to completion has dropped from 142 days in 2007 to just 80 days in 2008, the company found. It expects this figure to fall further as more deals are hastily wrapped up before the year-end.

The phenomenon, which Towers Perrin calls “Express M&A,” has largely resulted from companies making opportunistic acquisitions in light of the global credit turmoil.

“Market turmoil has conjured up the concept of Express M&A, a high-speed deal process affecting all sectors, including Canada’s commodity and energy industries where multinationals are looking to acquire assets at bargain basement prices,” said Eric D’Amours, head of M&A and restructuring at Towers Perrin in Canada.

“Safeguarding a company’s future via sale or restructuring has become a lightning priority in the face of deteriorating market conditions.”

The trend of quicker transactions will likely continue for several months to come, said D’Amours.

But he warned that such rushed transactions boost the risk associated with the deals.

“We are seeing significant elements of due diligence effectively being postponed until after completion. The concept of ‘seize the day’ is changing conventional M&A processes as the threat of future potential surprises pales in comparison to the scale of savings or strategic value that might be achieved,” he said.

Towers Perrin notes that critical elements of the deal process, such as leadership retention and practical execution planning, are occurring at a much faster rate. Considerations such as rewards analysis and cultural integration are being postponed until after completion.

The firm advises merging companies to build into the financials some margins for the unexpected.

“Acquirers would do well to remember that postponing some of the hard work on due diligence and integration planning will mean more focus, not less, will be required when the ink is dry if the deal is to be successful in the long-term,” said D’Amours.

“Coping with the speed of M&A could well be one of the enduring legacies of the current turmoil,” he added. “Working through deals with clients at this time, we believe it is important to try to draw lessons from our experience of the new challenges presented by Express M&A.”

IE