English business Redstation has two data centres in Gosport, Hampshire, and provides IT and cloud services to around 3000 customers.
Iomart has spent £5.1m in cash and is issuing 515,464 new shares to raise a further £1.5m for the deal.
There could be another cash payment of £1.5m if Redstation, which has 33 staff, hits profit targets in the period to March 2014. If the full pay-out target is met, it would make the deal the largest since it bought Easyspace for £12m in 2004.
It would also top the £7m package Iomart put together to buy Manchester-based Melbourne Server Hosting in August last year.
In the 12 months to June this year, Redstation's turnover was £5.2m with earnings before interest, tax, depreciation and amortisation at £2.4m.
The business had net assets of £1.8m.
Iomart said the transaction would make an immediate contribution to its own earnings.
The deal brings Iomart's data centre sites to 10, with the company saying it now houses 20,000 physical servers on behalf of its customers.
Angus MacSween, chief executive of Iomart, said: "The addition of Redstation will consolidate our position as the leading player in the dedicated server market in the UK.
"Redstation's customers deliver a wide variety of cloud applications and services, so this acquisition further underpins Iomart's position as the main provider of the complex infrastructure required by UK businesses to support the cloud environment."
Lance Taylor founded Redstation 15 years ago and has run the firm with business partner Peter Appleton since 2008.
Mr Appleton said: "I'm excited that Redstation is becoming part of Iomart because we've been on the same journey.
"We've both built great reputations for excellence in hosting by investing substantial amounts of money to create the best data centres and network facilities backed by the best technical support.
"The combination of Redstation and Iomart Group will be a powerful force in the market."
Iomart has frequently highlighted the opportunity for consolidation in the cloud and hosting sectors and is backed by a £20m war chest provided by Lloyds Banking Group.
Mr MacSween has said customers in the sector tend to be "sticky" so there is need for complete deals to grow more quickly.
The Glasgow company paid £1.4m for Surrey web-hosting business Skymarket and £1.5m for Welsh firm Internet Engineering during 2012.
Alongside acquisitions, it has also been investing in an optical fibre network between its data centres and an additional 16,000 square feet of space at its site in Maidenhead, Berkshire.
It posted a 56% hike in profits to £10.7m in its most recent financial year.
Iomart's 300,000 customers include media company STV, travel search engine Skyscanner and transport group Stagecoach.
Shares in Iomart closed the day ahead by 3.5p, or 1.2%, at 292p.