ITnet is set to go to the market in the next couple of months and is expected to be valued at up to£200 million.
The firm specialises in offering combined IT and business process management services. Its council clients include Birmingham City Council, Hackney LBC, Hertfordshire CC and Westminster City Council.
It is widely recognised as one of the three major players in the local government outsourcing market, alongside Capita and CSL.
Managing director Bridget Blow, who along with five other directors will become a paper millionaire as a result of the flotation, said: 'A stockmarket listing will give us greater flexibility to finance our future growth . . . It will also enable us to continue to incentivise our employees, who are the most important asset of the business.'
But one industry insider suggested Itnet might not find much to buy, given the acquisitive success of its quoted rival, Capita, which has seen its share price rocket since its flotation in 1989.
He also warned that ITnet was in a very competitive high volume, low margin business, making it difficult to satisfy shareholders looking for ever-improving performance.
ITnet marketing manager Claire Forrest said the firm had been approached in the past by potential buyers and was aware that future shareholders might be tempted by takeover bids if it failed to perform. But she said: 'We know strong financial performance is the key to us holding our own destiny.'
Capita chairman and chief executive Rod Aldridge said: 'I think its good for the industry that somebody else is floating. I wish them every success.'