The Redmond giant will make a cash tender offer of 19 Norwegian kroner per share, valuing the firm at 6.6 billion kroner or roughly $1.2bn.
Fast Search & Transfer's board of directors has unanimously recommended that shareholders accept the offer.
Microsoft reported that shareholders representing an aggregate 35 per cent of the outstanding shares have "irrevocably undertaken" to accept the offer. The transaction is expected to be completed in the second quarter of 2008.
"Enterprise search is becoming an indispensable tool to businesses of all sizes, helping people to find, use and share critical business information quickly," said Jeff Raikes, president of the Microsoft Business Division.
The acquisition also increases Microsoft's research and development presence in Europe, complementing existing teams in England and Denmark with new and significant capabilities in Norway.
Analyst firm Ovum agreed that the move is a sensible one for Microsoft.
"While the timing of the announcement came as a bit of a shock, given that Microsoft only updated its enterprise search product range in November, the offer is not a particular surprise," said Mike Davis, senior analyst at Ovum.
"This is a really good buy for Microsoft, putting it straight into the top league. It is certain to make other large vendors look at the acquisition of high-end solution providers rather than develop their own."
The offer will be subject to the customary terms and conditions, including receipt of acceptances representing more than 90 per cent of Fast Search & Transfer's shares and voting power on a fully diluted basis, and receipt of all necessary regulatory approvals on terms acceptable to Microsoft.
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