The purchase will expand Microsoft's presence in CRM and other business applications and could boost the company's efforts to bring .Net applications to the market. But the deal also could create a conflict with existing Microsoft Great Plains financial and CRM software. Navision competes with Great Plains.
The stock-and-cash deal is worth about $1.3 billion, according to the companies.
The Financial Times first reported on talks between the companies last week.
Navision, once the deal is final, will become part of Microsoft's Business Solutions division and its VedBaek, Denmark, headquarters will be the base of Microsoft Business Solutions in Europe, the Middle East and Africa, the companies said in a statement.
While the impact of the deal will be felt most in those geographies, some U.S. Navision partners downplayed the possibility of product overlap and conflict and said the buyout will only bolster Microsoft's application portfolio.