Misys and Temenos have confirmed their plan to merge.
But there has been some speculation over the prospects for UK jobs, after Swiss-based Temenos said the headquarters of the combined financial services software firm will be located in Switzerland and headed by its current CEO.
UK headquartered Misys employs a global workforce of 4,000 and has been looking for a potential buyer for some time. Last year there was an aborted takeover by US firm Fidelity National Information Services (FIS), after Misys said the bid undervalued the company following a year when profits rose by 12 percent.
A combined Misys and Temenos would make the new entity one of the largest specialist software suppliers to the financial sector. Misys software is used by over 1,200 financial firms with products covering risk and wealth management, trading of derivative securities and lending. Temenos provides software to more than 1,500 clients, ranging from corporate and retail to microfinance and community banks.
Confirmation of the merger talks comes after IT services firm CSC announced this week that Misys CEO Mike Lawrie will become CEO of CSC by the end of March. He has already taken a seat on CSC's board.
Last October Misys faced a revolt by shareholders over plans for "excessive" executive pay. In its latest half-year report published in January, Misys recorded an increase in orders of a third and revenue growth of more than a fifth.
In a joint statement the two companies said: "Temenos and Misys confirm that they have reached agreement in principle on certain key terms and are in continuing discussions regarding a possible all share merger of the two groups."
The statement added: "It is expected that the combination will yield significant cost savings and operational synergies through scale efficiencies and cross-selling opportunities." Although there was no specific announcement on potential job losses.
Guy Dubois, currently CEO of Temenos, will act as CEO of the combined group and Stephen Wilson, currently CFO of Misys, will act as CFO of the combined group.