Microsoft Corp. on Monday unveiled plans to acquire Nuance Communications as the tech giant continues to build up its cloud services for the healthcare industry.
Here are five things to know about the deal:
1. Redmond, Wash.-based Microsoft plans to buy Burlington, Mass.-based Nuance for $56 per share, representing an all-cash transaction valued at $19.7 billion, inclusive of Nuance's net debt. $56 marks a 23% premium to Nuance's closing price of $45.58 on Friday. Nuance's stock jumped to $53.80 on Monday morning following the news.
2. The acquisition builds on a partnership Microsoft and Nuance struck in 2019 to develop so-called "ambient listening" capabilities, or capabilities that use artificial intelligence to "listen" in the background during a patient's visit with a physician and automatically document notes in the electronic health record system.
"AI is technology's most important priority, and healthcare is its most urgent application," said Satya Nadella, Microsoft's CEO, in a statement. The Nuance acquisition will double Microsoft's total addressable market of healthcare providers to nearly $500 billion, according to Microsoft.
3. Nuance's CEO Mark Benjamin will retain his role, reporting to Scott Guthrie, Microsoft's executive vice president of cloud and AI.
4. Once the deal closes, Microsoft plans to report Nuance's financials as part of the company's "intelligent cloud" segment. In fiscal 2020, Microsoft reported $48.4 billion in revenue from this segment, up 24.1% year-over-year and comprising one-third of the company's total $143 billion in revenue. Nuance posted $1.5 billion in fiscal 2020 revenue, down 2.8% from the year prior, and $112.6 million in operating income, up 5.1% from the year prior.
Nuance, which sells AI tools across multiple industries, recently has focused its research and development resources on AI documentation tools for healthcare—which Benjamin has called a "high-growth, high-impact" area for the company. In February Nuance acquired Saykara, an AI startup that also uses ambient listening to automate clinical documentation for physicians.
5. Microsoft expects to complete the Nuance acquisition by the end of 2021.
