Paragon will become a wholly-owned part of Interserve's Construction division. The purchase price has not been disclosed.
Interserve said that the acquisition expanded its interior fit-out proposition in London and added expertise in delivering bespoke solutions across a range of commercial settings.
It also provides Interserve with access to the high-end re-fit market in the capital, which has maintained its value during the downturn.
Ian Renhard, managing director for construction, said: "This acquisition enhances our existing fit-out and interior services and provides us with additional revenue, most specifically, in the London and southeast fit-out market. All indicators show that the London refurbishment market performed well throughout the last five years and this acquisition puts us in a good position to take advantage of expected growth and provides the opportunity to develop services to new and existing clients across the Interserve group."