The deal, which is for an undisclosed sum, will create a £150m-turnover transactional and marketing communications giant, combining Lateral Group subsidiaries Howitt, Data Lateral and Dialogue Solutions with the former DST Output and Dsicmm businesses, which were merged to form IOS this time last year.

IOS chief executive Mark Felstead said: "This is an excellent strategic development for IOS. Lateral Group has a strong presence in the industry and we are pleased to be able to provide further solutions such as data insight and online marketing to our client base through this acquisition."

Nick Dixon, chairman and principal founder of Lateral Group, added: "We have found a great home for the business, and I am absolutely confident that it will go from strength to strength. We look forward to taking advantage of new technologies and resources through this transaction and achieving further scale as a marketing services provider."

Dixon added that he expected to remain involved with the business in some capacity following the acquisition, along with the rest of the Lateral Group management team. "One of the key criteria was that they wanted the management team as well as the company," he said.

Decisions have yet to be made on things like group branding, which will be done in consultation with clients, although Dixon was bullish about the opportunites the deal would create for both companies.

"The cross-selling opportunities between the two businesses will be massive - it's going to be really, really exciting," he said. "Clients want businesses that can offer them a range of different services and solutions and with the scale that we've now got as a combined group and the financial backing of DST Systems, it's a pretty awesome proposition."

The deal concludes a remarkable turnaround for the direct mail printer Howitt, which was bought out of administration by Dixon, Taylor and Hunter in February 2004, forming the foundation for what was to become the Lateral Group.

It also highlights DST Systems financial clout and desire to continue to consolidate the UK transpromo and marketing communications sector, in the wake of its acquisition of Dsicmm in August 2010.

Felstead said: "This move represents the execution of IOS’s strategy to extend and develop our product offering - particularly integrating communications through print, data and e-solutions - as well as helping to ensure that we continue to develop a market-leading position in our traditional services.

"At a time when there is much structural change taking place in the industry, it is important for IOS to lead the market. This acquisition helps us to achieve that. We are now in an even stronger position to support larger contracts across the entire spectrum of output solutions in the UK."

Dixon added: "If you look at the extensive range of products and services that we now have and where it wants to go in the future then, in my view, this makes us number one."