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Payroll software giant Northgate has bought yet another firm, acquiring management consultancy Kendric Ash in a deal that could be worth up to £14.2m.

Under the deal, Northgate will initially pay £9.2m for the firm, with a deferred payment of £500,000 to come later on, and a further payment of up to £4.5m once certain performance conditions are satisfied over a two-year period.

The new buy will give Northgate a partner to help public sector bodies to provide high quality services. The payroll firm plans to integrate Kendric Ash into its Public Services division, and is part of the company's strategy of expansion into strategic areas of the public sector.

"This acquisition builds upon our strategy of acquiring organisations which complement our current capabilities," said Dave Meaden, managing director of Northgate Public Services.

"Public services and the utilities are constantly under pressure to deliver value for money and effective services to their citizens. The private sector has to deliver new forms of partnership and innovative models of working with the public sector. These must offer flexibility and greater control for the sector, add value and save cost whilst delivering high-performing services."

Meanwhile, Northgate has also bought a 60.43 per cent stake in Brussels-based HR services firm Arinso for €228.4m. The size of the stake means that a mandatory offer for the firm will be issued.

"On paper this a good match, as the two companies are quite complementary," said Samad Masood, an analyst at Ovum.

"The idea is that Northgate's UK mid-market focused products and services will slot underneath Arinso's multi-national SAP-focused services across the 27 countries in which Arinso already has a presence. So, for Northgate, Arinso is a ready-made channel into these markets."

Masood expects the combined Northgate and Arinso to become a "significant global player with an improved ability to compete strongly against payroll players such as ADP and Ceridian", and viewed it as a positive move.

"However, they need to move up the value chain if they are going to be long term contenders and market makers in HR BPO," he concluded.

This is by no means the last of Northgate's acquisitions. In April, the company revealed to ENN that Northgate planned to continue its enlargement in ireland, through organic means and acquisitions, and is aiming to emulate its British successes on these shores.

Its Irish operation has grown from 20 full-time staff in 2004, to the current 60 between Belfast, Dublin and Cork. Last year Northgate HR processed over €5bn in salaries in Ireland.

Copyright © 2007, ENN

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