Technology giant Microsoft on Tuesday said it will acquire Nuance Communications in an all-cash deal that values the conversational artificial intelligence (AI) solutions provider at $19.7 billion, inclusive of net debt.
The deal, set to close by 2021, valued healthcare-focused Nuance at $56 per share, which is a 23% premium to the closing price of the NASDAQ-listed firm on April 9, Microsoft said in a statement.
With the acquisition, Microsoft aims to bolster its existing cloud-first strategy in the healthcare space, which includes Microsoft Cloud for Healthcare. Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud and AI at Microsoft, the statement said.
“The acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly $500 billion," the statement added.
Microsoft Cloud for Healthcare, introduced in 2020, provides capabilities to manage health data at scale and for healthcare organizations to improve patient experience, coordinate care, and drive operational efficiency, while helping support end-to-end security, compliance, and interoperability of health data.
Burlington, Massachusetts headquartered Nuance provides conversational AI and cloud-based software solutions for healthcare providers. Its products -- Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting – are clinical speech recognition software offerings built on Microsoft Azure.
Nuance’s solutions are currently used by over 55% of physicians and 75% of radiologists in the United States, and used in 77% of US hospitals. Its Healthcare Cloud revenue grew 37% year-over-year in the financial year ended September 2020.
The two companies have built over an existing partnership between the companies, announced in 2019. Nuance and Microsoft had partnered for clinical documentation and decision support, voice biometrics, conversational AI, and natural language understanding processes in healthcare.
Beyond healthcare, 1992-founded Nuance provides services of Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions to companies around the world across all industries. The offerings will find place across Microsoft Cloud’s products such as Azure, Teams, and Dynamics 365, it said.
Nuance would make for Microsoft’s second-biggest buy since inception. In 2016, it had bought professional social media network LinkedIn at $26.2 billion.
In other healthcare-cloud related news, Wall Street Journal in February reported that IBM was looking to sell its Watson Health unit because it was not profitable, despite bringing in $1 billion annually in revenue.
In the same month, San Francisco, California based Innovaccer became the latest India born startup to join the global league of technology unicorns at a valuation of $1.3 billion, on the back of a $105 million funding round led by Tiger Global Management.