Microsoft has confirmed it has struck a deal to acquire artificial intelligence (AI) and speech recognition technology vendor Nuance Communications for US$19.7 billion, including debt, marking a major step forward in the company's industry vertical play.
The confirmed value of the proposed acquisition is in line with the rumoured price tag in unconfirmed reports of talks between the two companies that emerged earlier in the week, placing the buy at US$56 per share, or about US$16 billion, not including debt.
Now, Microsoft and Nuance Communications say they have entered into a definitive agreement under which Microsoft will acquire Nuance in an all-cash transaction that includes the target company’s debt. The transaction is intended to close this calendar year.
Based in Burlington, Massachusetts, Nuance Communications makes solutions that understand, analyse and respond to human language.
Drawing upon decades of domain and artificial intelligence expertise, Nuance works with thousands of organisations in a variety of industry verticals, including healthcare, telecommunications, automotive, financial services, retail and more.
Beyond healthcare, Nuance provides AI expertise and customer engagement solutions across interactive voice response (IVR), virtual assistants, and digital and biometric solutions to companies around the world.
Nuance’s products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all leading clinical speech recognition software-as-a-service (SaaS) offerings built on Microsoft Azure.
The company’s current CEO, Mark Benjamin, will remain in the role, reporting to Scott Guthrie, executive vice president of cloud and AI at Microsoft.
“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,” said Benjamin.
“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,” he added.
The deal comes as Microsoft works to build out its industry verticals offering, with the vendor launching three new industry-specific cloud offerings in February: Microsoft Cloud for Financial Services, Microsoft Cloud for Manufacturing and Microsoft Cloud for Nonprofit.
At the time, Microsoft also flagged the first update to its previously announced Cloud for Healthcare offering, and the public preview timing for Microsoft Cloud for Retail, which was introduced in January.
Announcing the acquisition deal, Microsoft flagged its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities, including the Microsoft Cloud for Healthcare offering, introduced in 2020, which aims to address the needs of the healthcare industry.
“Today’s acquisition announcement represents the latest step in Microsoft’s industry-specific cloud strategy,” the vendor said in a statement.
Microsoft’s acquisition of Nuance builds upon the pre-existing partnership between the two companies that was announced in 2019, the vendor said. The deal will see Nuance and Microsoft deepen their existing commitments to the extended partner ecosystem.
“By augmenting the Microsoft Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s expertise and relationships with EHR [electronic health record] systems providers, Microsoft will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services,” Microsoft said.
It is anticipated that the acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly US$500 billion.
“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” Microsoft CEO Satya Nadella said. “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,” he added.
The transaction has been unanimously approved by the boards of directors of both Nuance and Microsoft. However, it remains subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions.
Upon closing, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment.