If a founder isn’t quite ready to ride off into the sunset, picking the right growth partner—whether it’s a strategic acquisition, merger, or private equity firm—is a critical decision. Lisa Melchior experienced these transactions over 20 years in private equity; now she started her private equity firm, Vertu Capital, to continue doing deals and helping entrepreneurs grow.

Speaking with TechExit.io, Lisa lifted the curtain back on the proprietary 19-point checklist her company uses to evaluate acquisitions.

How Vertu Capital chooses companies to invest in

Taking on a private equity partner is about growth—often, the firm will take a majority stake but not buy out the founder(s) entirely. The goal is that the PE firm will work alongside the founders to grow the business to its next phase, either going public, subsequent acquisition, or secondary financing round to pull value from the company. Done well, this next exit can earn the founder more than the first exit, even with a smaller equity percentage.

For Lisa and Vertu Capital, partnering on growth starts with their core thesis. The firm only invests in established enterprise software or tech-enabled businesses with greater than $20 million in revenue and a valuation between $75 million and $250 million. Further, Vertu Capital looks for companies headquartered in Canada and either already profitable or have a clear path to profitability.

“Being headquartered in Canada is important,” said Lisa. “A big part of the mission of Vertu Capital is to bring these amazing Canadian companies more clearly to the world markets.”

But matching the thesis is not a guarantee that Vertu Capital will partner with a company. There is a 19-point checklist informed by Lisa and her partners’ decades of investment banking and private equity experience.

While the list itself is proprietary and not shared beyond the Vertu team, Lisa pulled back the curtain for TechExit.io to explain the pillars she and the team look for in an investment.

1. Business model quality

Lisa wants to understand how the business model functions. This includes things like basic financials but also how the company measures itself (KPIs), how it goes to market, the product roadmap, and any R&D plans.

Vertu Capital has multiple Operations Advisors (OAs)—industry leaders with deep expertise—to help its companies grow. With that in mind, Lisa is not worried about if you have the perfect strategy from the get-go. Instead, she wants to understand your operational model so she can better assess how Vertu’s team can unlock more value.

2. Market size and quality

When assessing an investment, Lisa wants to understand the market’s size, potential, and quality—looking at things like the sustainability of growth, whether the market has more opportunity to mature, and if there’s a possibility of a company playing in multiple markets as it grows.

This is where Vertu’s OAs can help a company navigate choppy waters. Lisa shared the example of Andrea Mandel-Campbell, an OA with deep communications experience who helps companies get their message out. Or Jason Smith, a serial entrepreneur who understands the intricacies of scaling to hundreds of millions in revenue. Each OA can help take advantage of a high-quality market opportunity, which is another piece of Vertu unlocking more value.

3. Competitive dynamics

A key question Vertu needs to ask is what’s going on with competitors—are they raising? Acquiring? How are they growing? What is their positioning relative to the potential investment? This is not just to assess potential threats but also possibly uncover opportunities that the Vertu team can help navigate.

Lisa was clear that it’s not necessarily about passing all 19 points with flying colours, but instead looking at the balance of all factors. That means Lisa is above all looking for honesty and transparency—she says there’s absolutely no point in trying to be mysterious because the details will come out eventually. The caveat is a situation where you have proprietary methods, which is something Lisa wouldn’t expect you to divulge until non-disclosure agreements are signed. And in those cases, it’s not about being mysterious, just ensuring you protect your business assets.

Beyond analytics, a “high-quality relationship” is paramount

Founders and teams will typically stick around and partner with Vertu for long-term growth, which means that Lisa and the Vertu team will spend a lot of time and energy growing the business with the founders rather than simply cashing them out.

For long-term plans to work, Lisa requires a “high-quality relationship” with the management team and founders. While this is a more subjective assessment, Lisa said the quality of the relationship becomes apparent during the diligence process. In particular, she’s looking at: how she and the Vertu team feels about the engagement, how the management team engages back with them, especially if any weaknesses or problems come to light, and the overall quality of the discourse—if they can discuss things like vision and plans to go farther together.

“If your business is performing well, there are probably a lot of little jewels in there,” said Lisa. “You don’t have to manufacture anything to impress us—just talk, be transparent and honest, and we can mutually assess the opportunity.”