The UK's Northgate Information Solutions has agreed to buy a majority stake in Arinso International of Belgium, combining two big European providers of human resources software and services.
One analyst called it a good match that could help Northgate expand internationally. But it raises potential conflicts because Northgate has its own human resources software, and Arinso's services are based on HR and payroll applications from SAP, said Ovum analyst Samad Masood.
Northgate agreed to pay €228.4m (£155.9m) to buy the 60% of Arinso owned by its chief executive, Jos Sluys. It expects to complete the deal by 1 August, subject to shareholder approval, after which it will make an offer to buy the remainder of Arinso, it said. The value of the total acquisition would be €377.9m (€258m), it said.
Based near London in Hemel Hempstead, Northgate provides HR software and outsourcing services to 9,700 clients, including most of the UK's local public authorities and all its police forces. They are mostly in the UK and Ireland, although it has partners or offices in a handful of Asian and other European countries.
Arinso operates in 27 countries in Europe, Asia and the Americas. It offers HR outsourcing, integration and consulting services based around software from SAP. The company had revenue of €203.8m (£139.1m) for the 2006 calendar year.
Northgate hopes the deal will help expand sales of its HR application, ResourceLink, internationally, by offering it in the countries where Arinso operates. It also hopes to win multinational outsourcing deals from Arinso's SAP-based outsourcing platform, called euHReka, it said.
"There is a concern that the acquisition might complicate Arinso's relationship with SAP," Masood wrote.
Northgate's products are aimed at customers who are typically too small to invest in big SAP implementations, he said, so the deal "should not be too much of a problem in the near term".
"But in the big picture this acquisition is about building a technology agnostic HR services business, and in the longer term we would not be surprised if Northgate/Arinso consider targeting large clients that are not SAP-centric," Masood concluded.