AWARD SPOTLIGHT: Novacap Winner of 2021 PE Deal of the Year for Intelerad Medical Systems

It was 2016, after years of courting Intelerad Medical Systems Inc., that Montreal-based PE firm Novacap finally secured an investment in the medical imaging software company.

It was the first time Intelerad, founded in Montreal in 1999, had agreed to take on outside investors.

“We felt that for a company to go to the next level, we needed some help — and it wasn’t just money,” says Randall Oka, a co-founder of Intelerad and its president and CEO at the time of the Novacap investment.

Intelerad hired Deloitte to run a formal investment process and chose Novacap from a shortlist, including American investors, because of its team of ex-entrepreneurs. The Montreal connection was also a factor, Oka says.

“The fact that Novacap was led by former entrepreneurs, and they were local, that seemed kind of attractive to us. We just felt that Novacap seemed like a good fit,” says Oka, who was CEO at the company for 18 years before stepping down in 2018 for personal reasons. ​“They helped us think bigger and had the network to recruit the right people to make it happen.”

François Laflamme, a Novacap senior partner and the PE firm’s lead person on the Intelerad investment, says he was attracted to the company’s history and long-term growth potential.

“We saw a solid technology foundation and solid traction in the market they were in,” Laflamme says.

He also saw room for meaningful improvements in sales and customer experience that could help Intelerad boost its revenues.

Novacap helped to recruit executives to lead the sales and customer experience teams, as well as in other key leadership positions. The focus helped Intelerad increase yearly total contract value bookings from $20M in the first year of Novacap’s investment to $80M in 2019.

Then, in 2018, after Oka stepped aside as CEO, Novacap recruited Paul Lepage, former president of TELUS Health and Payment Solutions, into the top job.

“It was the right fit for me at the right time with a company that I saw had a lot of potential to grow,” recalls Lepage, a cancer survivor and former customer of Intelerad from his medical treatments.

Lepage was also excited by Intelerad’s technology and its fee-per-use business model. ​“I was motivated by the opportunity to continue to work at a company that helps to deliver better health and business outcomes in health care, while also making a difference in peoples’ lives,” he says.

His mandate as CEO was to grow the business both organically and through M&A. Within months, he guided Intelerad’s acquisition of Seattle-based Clario Medical. Intelerad continued its growth trajectory from there.

Less than four years into its investment, Novacap was impressed by the metrics, which included tripling EBITDA and more than doubling revenues. By 2019, Intelerad’s technology was being used by some of the largest hospitals, health systems and imaging service providers around the world. During the same period, Intelerad’s employees grew from 277 to more than 430 today. Novacap felt it was time to exit the investment.

“We had a very nice business. We knew our money was made,” Laflamme says.

In January 2020, Novacap announced an agreement to sell its majority stake in Intelerad to Hg, a U.K.-based private equity firm specializing in software and service businesses. With the sale, Novacap earned an IRR of 85.3% and a 9.7x multiple on invested capital.

Lepage, who has since stepped down from the company, said at the time the deal was announced that Hg was the right buyer given its access to ​“a huge pool of knowledge in global healthcare technology and the opportunity to significantly advance the company’s strategy.”

Lepage was replaced as CEO last fall by Mike Lipps, and the company continues to grow both organically and through acquisitions.

“Intelerad is an incredibly successful company with a meaningful mission to improve patient healthcare,” Lipps stated at the time of his appointment. ​“As a sector leader, we are in a great position to continue our strong momentum of delivering value for healthcare organizations around the world.”