Kohlberg Kravis Roberts (KKR), the American private equity firm, has agreed to buy Northgate Information Solutions, the IT group that processes payslips for a third of Britain's workforce and runs the country's criminal justice software systems.

The acquisition, for £593million, will unlock a windfall of up to £17million for Chris Stone, the Northgate chief executive. Mr Stone will stay with the company as it embarks on an expansion plan.

When Mr Stone joined Northgate in 1999, its shares were languishing at 6p — a sixteenth of KKR's takeout offer — and the company was described as “seven-eighths bust”. It has since built itself up through acquisitions, the most recent of which is the takeover of Arinso, the Belgium HR specialist, for €371million (£268 million), a deal that KKR said had transformed Northgate into a global supplier.

Northgate's strong recurring revenue base is attractive to private equity, even amid a global credit crunch, analysts said. The company runs the payroll systems of blue-chip companies, including Tesco and Shell, as well as delivering speeding and parking fines and supplying IT systems to schools.

The deal lifted shares in other software companies with public sector contracts. Shares in Civica and in Anite, which has put its public sector arm up for sale, rose sharply.

KKR's 95p-a-share offer for Northgate represents a 60 per cent premium on its target's closing price the day before it said that it had received an approach. However, it is only a 7 per cent premium to Northgate's price at the end of April.

Sources close to Northgate said that the company, which was advised by Rothschild, was attracted to KKR's record of investing for relatively long periods — an average of seven years. They said that KKR had pledged funds for an acquisition strategy.

It was noted that the price agreed by KKR — 18 times operating profits — shows that private equity firms are still ready to pay big multiples for selected assets despite the credit crunch.

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