Microsoft spends $19.7b to acquire AI software firm Nuance

Microsoft will hand over US$19.7 billion (NZ$28 billion) to acquire cloud and artificial intelligence software provider Nuance, as Microsoft aims to build out its recently-announced Microsoft Cloud for Healthcare offering.

The acquisition enables Microsoft to capitalise on Nuance's 'decades' of experience in both enterprise artificial intelligence (AI) and healthcare, whilst also supporting the needs of the healthcare industry.

Nuance products include offerings built on Microsoft Azure, such as the PowerScribe One, Dragon Medical One, and Dragon Ambient eXperience. These solutions are widely used across the United States.

Nuance CEO Mark Benjamin will stay on as Nuance CEO. He will report to Microsoft's Cloud and AI vice president Scott Guthrie.

"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," says 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.

He says that Microsoft can provide intelligent cloud services at scale, and it's also passionate about creating technology that makes a difference.

Microsoft and Nuance have been partners since 2019, and both companies believe that the acquisition will double Microsoft's total addressable healthcare provider market position.

Microsoft CEO Satya Nadells says, "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 expertise in other verticals beyond healthcare will also support Microsoft's wider cloud. Nuance's solutions include AI expertise and customer engagement solutions across Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions.

According to Microsoft, Nuance's expertise in these areas will be combined with Microsoft's cloud, including Azure, Teams, and Dynamics 365, to deliver next-generation customer engagement and security solutions.

Microsoft will acquire Nuance for US$56 per share, a 23% premium on the closing price as of 9th April. The transaction is expected to close by the end of the calendar year 2021.

The transaction has been unanimously approved by the boards of directors within both Microsoft and Nuance.

Goldman Sachs - Co. LLC is acting as the exclusive financial advisor to Microsoft, and Simpson Thacher - Bartlett LLP is acting as its legal advisor.  Evercore is acting as the exclusive financial advisor to Nuance, and Paul, Weiss, Rifkind, Wharton - Garrison LLP is acting as its legal advisor.