Microsoft spending $19.7B on Nuance and its AI for healthcare providers

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Microsoft will buy Nuance at $56 per share, representing a 23% premium to Nuance’s closing price on Friday, April 9, 2021. The all-cash transaction is valued at $19.7 billion, inclusive of Nuance’s debt, according to a news release.

Nuance develops conversational AI and cloud-based ambient clinical intelligence for healthcare providers, including the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting. The company’s platforms work with core healthcare systems, including longstanding relationships with Electronic Health Records (EHRs).

According to the release, Nuance’s platforms are currently used by more than 55% of physicians and 75% of radiologists in the U.S., while they are also used in 77% of U.S. hospitals.

Microsoft said it accelerated its efforts to offer industry-specific cloud platforms, including the Microsoft Cloud for Healthcare, which it introduced last year. The acquisition of Nuance adds to this effort, with the companies building upon an existing partnership established in 2019.

By augmenting the Microsoft Cloud for Healthcare platform with Nuance’s offerings, Microsoft expects to better empower providers with ambient clinical intelligence and other cloud services. The company expects the acquisition to double its total addressable market in the healthcare provider space, bringing the value of the market to nearly $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 in the release. “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.”

Mark Benjamin will remain Nuance’s CEO and report to Microsoft EVP of cloud & AI, Scott Guthrie. The boards of both companies unanimously approved the deal, which is expected to close by the end of the calendar year, subject to approval by Nuance’s shareholders.

Upon closing, Microsoft expects Nuance’s financials to be reported as part of its intelligent cloud business segment. Microsoft anticipates that the acquisition will be minimally dilutive in 2022 and accretive in 2023 to non-GAAP earnings per share.

“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,” Benjamin said. “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.”