MouchelParkman, the result of a merger in August, has net assets of about £60m now so it would hit this 25% limit when it had borrowed £15m. If net assets increased, the amount it would allow itself to borrow would grow in proportion.
The group operates mainly in the public sector, which does not like the companies it employs to be too indebted, as it requires financial certainty.
MouchelParkman chief executive Richard Cuthbert said: "We don't want to be too heavily geared [indebted]. We wouldn't materially gear the company – by which I mean about 25% of net assets. The public sector really wants to see a strong balance sheet."
The group, which is not indebted at present, has £15-20m in cash available, much of which is likely to be used for acquisitions.
The public sector really wants to see a strong balance sheet
Richard Cuthbert, chief executive
Cuthbert said that significant buys are unlikely for another six months when the company has settled into its merged form. He said: "We're not rushing out to do a deal, but we are always on the lookout."
Cuthbert was talking after the announcement of the company's 12-month results to 31 July. Although announced to the stock exchange as MouchelParkman, the results only incorporated figures from Mouchel, as the year-end date occurred before the merger.
Mouchel made a pre-tax profit of £7.55m during the 12 months, up from £3.95m the previous year. Turnover was £147.42m, up 44% from £102.38m last year.