AWARD SPOTLIGHT: Novacap Management Winner of CVCA’s 2018 Private Equity Deal Of The Year for Chemical Computing Group
Novacap first got to know life sciences software company Chemical Computing Group (CCG) in the late 1990s and, in 2006, the two sides even looked at buying a company together. That deal didn’t happen, but the companies stayed in touch.
Then, in August 2011, Novacap wound up buying Montreal-based CCG — which provides drug discovery applications for the medical industry — alongside the company’s president, CEO and co-founder, Paul Labute.
“We flirted for a very long time before we did the deal,” quips Pascal Tremblay, Novacap’s president and managing partner. “That’s the longest time ever for me, 13 years, in talking to a company before an acquisition.”
CCG provides customized software applications for drug discovery to pharmaceutical, biotech and academic researchers. Its main product, the Molecular Operating Environment (MOE), is a drug discovery software platform that combines visualization, modeling and simulations, as well as methodology development. The software uses a programming system known as the Scientific Vector Language (SVL), which was created by CCG. It has been described as a “chemistry aware” computer programming language with more 1,000 functions for analyzing and manipulating chemical structures and related molecular objects.
“This is a very unique company,” says Tremblay. “What they do is literally rocket science in their software.”
Tremblay says it’s a small market with only two global players, a high barrier to entry, and “massive” recurring revenues that were built up slowly with new accounts over the year.
In the spring of 2017, CCG was sold to private equity firm Altaris Capital Partners for an undisclosed amount.
“We had great interest from many players,” Tremblay says of the deal process. They agreed to a deal with Altaris Capital Partners given its history of doing deal in the industry and reputation for allowing their companies to carry on with their corporate culture.
“CCG today is still a small, entrepreneurial, family-type business. We needed a buyer than was a fit with these guys, that was part of the criteria,” Tremblay says.
As why they sold when they did, Tremblay said the market was strong and CCG was in a very enviable position — and still is — with its software. Novacap also wanted some of the managers to receive some equity for their hard work in building the company to date.
Tremblay says many managers, including Labute, have stayed on. “It was a very successful transaction. It was a win-win for everyone,” he says. “You always make money with top management. These guys are the best.”