Acquisition will enable Microsoft to offer new cloud and AI capabilities across healthcare and other sectors

Burlington MA HeadquartersTN (1)

Headquarters of Nuance in Burlington, Massachusetts. (Credit: Nuance Communications, Inc.)

Microsoft has agreed to acquire US-based conversational artificial intelligence (AI) company Nuance Communications for $19.7bn.

As per the terms of the deal, the tech major will acquire the AI firm for $56 per share in cash, which is inclusive of the latter’s net debt.

Upon its closing, the deal will be the second-largest transaction for Microsoft following its $26.2bn acquisition of LinkedIn in 2016.

Through the acquisition, the tech major expects to accelerate its industry cloud strategy for healthcare. The company said that the transaction will combine solutions and expertise for providing new cloud and AI capabilities across healthcare and other industries.

In particular, Microsoft said that the acquisition will help double its total addressable market in the healthcare provider space to nearly $500bn.

Microsoft CEO Satya Nadella said: “Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI.

“AI is technology’s most important priority, and healthcare is its most urgent application.

“Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud for Healthcare and Nuance.”

Nuance’s offerings include speech recognition and artificial intelligence for multiple sectors. In 2005, the firm had merged with rival speech application provider ScanSoft, which was a spin-off of Xerox.

One of the notable achievements of the company is in providing a speech recognition engine for Siri, the virtual assistant of Apple.

Its products include the Dragon Ambient eXperience, PowerScribe One, and Dragon Medical One.

Nuance’s solutions are said to be used by 77% of hospitals in the US. More than 55% of physicians and 75% of radiologists in the US are claimed to use its solutions for providing better patient experiences.

The company had already been partnering with Microsoft since October 2019 with an objective to transform the doctor-patient experience.

Nuance also provides its expertise in AI along with customer engagement solutions across interactive voice response (IVR), virtual assistants, and digital and biometric solutions to businesses in all industries.

Nuance CEO Mark Benjamin said: “Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions.

“To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care.

“The path forward is clearly with Microsoft —  who brings intelligent cloud-based services at scale and who shares our passion for the ways technology can make a difference. At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey.”

The transaction, which is subject to Nuance’s shareholders’ approval, regulatory approvals, and other customary closing conditions, is expected to close by the end of 2021.