A British private-equity firm is buying a controlling stake in Montreal medical imaging software firm Intelerad Medical Systems Inc. for more than $650-million.
With the transaction, London-based HgCapital LLP, which has $12-billion in funds under management, is purchasing most of Montreal-area private equity firm Novacap’s position in Intelerad, which it bought in 2016. It’s Hg’s first investment in Canada and fifth in North America. The deal resulted from a competitive process administered by U.S. investment bank Piper Jaffray & Co. and is expected to close this quarter. The value the deal places on the company was not disclosed but is believed to be below $1-billion.
The deal also marks the latest in a number of later-stage financing transactions by scaling Canadian tech companies that choose to transfer ownership to a small number of private, experienced, hands-on investment professionals rather than deal with the scrutiny, added costs and distractions of running public companies.
Intelerad has expanded revenues by more than 20 per cent annually in the past several years and is set to surpass $100-million in revenue in its fiscal year that will end July 31, an amount chief executive Paul Lepage said “is too small” for a public company, although both Canadian software companies that went public last year, Lightspeed POS Inc. and Docebo Inc., were also below that level. “We can comfortably grow the company threefold” or more in the next five years, he said. “I’m not saying by the time we get to that size an IPO is not an option. But we felt comfortable [that remaining controlled by private equity] was the best option for Intelerad at this point.”
The 400-employee, profitable company has been an under-the-radar Canadian success. It was co-founded in 1999 by chief engineering officer Richard Rubin and two colleagues at the Montreal General Hospital stemming from their efforts to create a digital picture archiving and communication system to replace film. Mr. Lepage, the former president of Telus Health and Payment Solutions, joined in the fall of 2018.
The company’s software is a common platform accessible over the internet, which helps streamline workflows and improve collaboration between various medical professionals so they don’t have to transfer the files between multiple systems. It is used by more than 300 hospitals, imaging centres, clinics and radiology groups in the United States, Canada, Britain, Australia and New Zealand to view and share more than 200,000 medical images daily, paying by the file.
The company competes in a busy field that includes hardware giants Philips, Fujitsu, Agfa and GE and software providers Visage Imaging Inc. from Australia and Sweden’s Sectra AB. Last year, Britain’s National Health Service selected its platform to use in three regions of the country.
Mr. Lepage said that, with Hg’s backing, the goal is to deliver steady growth by expanding within its existing geographies, buying other companies and by expanding its technology offerings. Last year, Intelerad committed to spend $75-million from its internal funds over five years in research and development to add cloud-based machine learning and artificial intelligence medical-imaging capabilities.
Novacap senior partner François Laflamme said Intelerad had surpassed his firm’s initial objectives when it invested four years ago to accelerate its growth “while allowing the development of best-in-class enterprise medical imaging solutions. … I am proud and convinced that the management team with the new ownership will continue to contribute to the [company’s future] success."
Editor’s note: (Jan. 23, 2020) Last year, Intelerad committed to spend $75-million from its internal funds over five years in research and development. An earlier version of this story incorrectly stated the amount as $7-million.
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Sean Silcoff