The merged business will operate under the Framfab name and will be led by the former Oyster chief executive Luke Taylor, who will report to Framfab's chief executive, Steve Callaghan. The appointment of a joint management team is expected shortly.
According to recently released figures from Financial Intelligence, Framfab is the UK's fifth-largest digital business, with Oyster coming in at eighth place.
Framfab claims the newly merged business will be the UK's largest full-service digital agency.
The £12 million price-tag will be paid with £10 million cash and £2 million in shares, if the company meets sales targets set in the buyout deal.
Oyster's revenues for 2004 were £10.2 million, with operating earnings of £1.2 million. Framfab expects the acquisition to increase group profits by 35 per cent to 40 per cent in 2005.