Microsoft has announced that it will buy AI and speech recognition company Nuance Communications for approximately $16bn in cash plus debt, adding to its growing healthcare services portfolio. 

The purchase of Nuance Communications is the second-largest in Microsoft’s history, after its acquisition of networking site LinkedIn in 2016.

According to Microsoft, this would bolster its software and artificial intelligence expertise for healthcare companies. So-called “telehealth” and remote doctor visits have boomed in lockdown. This growth is forecast to continue after the pandemic. Microsoft chief executive Satya Nadella commented:

“Nuance provides the AI layer at the healthcare point of delivery. AI is technology‘s most important priority, and healthcare is its most urgent application.”

The deal, which includes Nuance debt, is expected to be completed this year. Nuance, based in Massachusetts, was founded in 1992 and employs more than 1,600 people globally and is active in 28 countries.

Known as a speech recognition pioneer, it has more recently focused on providing software to the healthcare industry, such as software that helps to automate radiology reports and makes it easier for doctors to create patient notes by dictation.

Telehealth is a fast-growing sector of healthcare. Photo Credits: BBC

Nearly 80% of US hospitals are already Nuance customers. Purchasing the firm will dramatically expand Microsoft’s potential market in the healthcare industry. According to Nuance executives joining forces would help deepen its cloud-based offerings and allow it to tap into Microsoft’s existing global customer base.

The acquisition builds on a partnership the two companies formed in 2019 to automate clinical administrative work such as documentation. Wedbush Securities analyst Dan Ives said :

“Clearly, Microsoft is on the “offensive” around M&A with the company in a clear position of strength to capitalize on its entrenched position in the cloud going forward. Nuance will be another feather in its cap.”

Microsoft is to pay $56 per share to bring the firm under its own roof. That price is about 23% higher than where Nuance shares were trading on Friday.