How much debt is safe for a public serial acquirer?

What debt levels do public serial acquirers disclose?

• Lifco, 2025: a stated range of 2 to 3 times EBITDA for interest-bearing net debt. The actual figure was 1.1x (1.2x in 2024). Counting put and call option liabilities for acquisitions, net debt was SEK 12,048M, or 1.7x EBITDA, of which SEK 2,930M was option liabilities. The equity ratio was 46.9% ( Annual Report 2025).
• Judges Scientific, 2025: adjusted net debt of £42.6M and gearing slightly below 1.5x EBITDA (1.7x a year earlier). Its £90M revolving facility had £59.6M drawn and runs to 1 July 2028, with an accordion of £50M that is uncommitted. Covenants: gearing no higher than 3.0x adjusted EBITDA and interest cover of at least 3.0x ( FY2025 results).
• Addtech, year to 31 March 2026: net debt excluding pensions of SEK 5,658M, 0.7 times equity, the same ratio as in each of the three prior years ( key financial indicators).
• Berkshire:"We use debt sparingly", and it will reject interesting opportunities rather than over-borrow ( Owner's Manual). The 2025 letter repeats that it uses debt sparingly and prudently ( 2025 letter).

The Lifco and Judges figures show how a stated ceiling and the actual level can differ. Both ran well under their ceilings in 2025.

How does Constellation structure its debt?

Constellation separates debt with recourse to the parent from debt without it. At 30 June 2026 its CSI credit facility had a $1,085M limit, was unsecured, and had nothing drawn. It also reported $1,000M of senior notes with recourse to the parent (5.158% due 2029 and 5.461% due 2034), a $500M promissory note at 7% due 2063 without recourse, and $2,120M of principal under other debt facilities without recourse. Total debt was $4,196M against $2,886M of cash ( Q2 2026 MD&A).

The older letters give the philosophy. The 2015 letter describes its debt load as increasing but still moderate, and says it wants to avoid short-term debt financing long-term assets ( 2015 letter). Matching debt term to asset life is a rule I would copy.

Which debt measure should you watch?

• Net debt to EBITDA is the usual headline, as at Lifco and Judges.
• Interest cover, EBITDA divided by interest, shows whether a rate rise hurts. Judges sets a floor of 3.0x.
• Debt-like items. Lifco's two figures, 1.1x and 1.7x, differ only by earn-out and put/call liabilities. Count them.
• Recourse. Debt that sits in a subsidiary without a parent guarantee is a different risk from debt the parent must repay.

How much cushion should the debt leave? A worked example

Assumptions. EBITDA is $3.0M and the covenant caps net debt at 3.0x EBITDA, the level Judges discloses. Interest is 8% of debt. Compare two starting positions.

• 1.5x ($4.5M of net debt): interest is $0.36M and interest cover is 8.3x. EBITDA can fall to $1.5M before reaching 3.0x. That is a 50% fall.
• 2.5x ($7.5M of net debt): interest is $0.60M and cover is 5.0x. EBITDA can fall to $2.5M before reaching 3.0x. That is a 16.7% fall.

Both companies look sound in a normal year. Only the first survives a bad one. In a small group, losing one customer or one owner could remove that much. My view is that a small public holding company should run well below any covenant until it has several businesses and a record of cash conversion.

For a lender's view, see how to calculate DSCR for an acquisition. For funding without more bank debt, see funding acquisitions without more SBA debt. Stock can replace debt; see whether to issue shares.

Where these numbers come from: Lifco is from its Annual and Sustainability Report 2025. Judges is from its FY2025 results. Addtech is from its key financial indicators. Constellation is from its Q2 2026 MD&A and 2015 letter. Berkshire is from its Owner's Manual and 2025 letter. The cushion figures are the site's arithmetic on stated assumptions.

Related questions

Is 3x net debt to EBITDA safe?

It is the gearing covenant Judges discloses, but a covenant is a limit, not a target. Lifco and Judges both ran far below theirs in 2025.

Can a small public company borrow like a large one?

Usually not. Lenders look at size, history and cash conversion. Disclosed groups with long records can borrow at fixed rates for years; a new holding company has to earn that.

Does using stock instead of debt remove the risk?

It removes the covenant risk and adds dilution. Which is cheaper depends on your share price; see when your stock is cheap currency.

What comes next

Debt and deal size limit each other, so check the size side too: How big each acquisition should be.

Related articles

• How big should each acquisition be relative to the holdco?
• Should a holdco pay a dividend, buy back stock or keep acquiring?
• Why did Constellation Software almost never issue shares, and Teledyne issue many?
• What share price or P/E makes stock a sensible currency?
• How do you build a holding company for acquisitions?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.