Microsoft acquires Nuance for $19.7bn

  • April 20, 2021
  • Steve Rogerson

Microsoft is to acquire Massachusetts-based Nuance for $19.7bn; Nuance has developed cloud and AI software for healthcare and enterprise AI.

Microsoft introduced the Microsoft Cloud for Healthcare in 2020, which aims to address the needs of the rapidly transforming and growing healthcare industry. This acquisition is expected to add to that.

Nuance provides conversational AI and cloud-based ambient clinical intelligence for healthcare providers. Its products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all clinical speech recognition SaaS offerings built on Microsoft Azure.

Nuance’s products work seamlessly with core healthcare systems, including longstanding relationships with electronic health records (EHRs), to alleviate the burden of clinical documentation and empower providers to deliver better patient experiences. Nuance products are used by more than 55% of physicians and 75% of radiologists in the USA, and used in 77% of US hospitals. Nuance’s healthcare cloud revenue experienced 37% year-over-year growth in the year ending September 2020.

Microsoft’s acquisition of Nuance builds on the successful existing partnership between the companies that was announced in 2019. By augmenting the Microsoft Cloud for Healthcare with Nuance’s products, as well as the benefit of Nuance’s expertise and relationships with EHR systems providers, Microsoft should be better able to empower healthcare providers through ambient clinical intelligence and other Microsoft cloud services.

The acquisition will double Microsoft’s total addressable market in the healthcare provider space to nearly $500bn. Nuance and Microsoft say they will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security and compliance.

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” said Satya Nadella, CEO at Microsoft. “AI is technology’s most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI 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.”

Beyond healthcare, Nuance provides AI expertise and customer engagement across interactive voice response (IVR), virtual assistants, and digital and biometric products to companies around the world across all industries. This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams and Dynamics 365, to deliver customer engagement and security.

“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,” said Mark Benjamin, who will remain CEO of Nuance. “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.”

The transaction has been unanimously approved by the boards of directors of both Nuance and Microsoft. The deal is intended to close by the end of this year and is subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions.

Upon closing, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment. Microsoft expects the acquisition to be minimally dilutive – less than one per cent – in 2022 and to be accretive in 2023 to non-GAAP earnings per share, based on the expected close timeframe.

Goldman Sachs is acting as exclusive financial advisor to Microsoft, while Simpson Thacher & Bartlett is acting as its legal advisor. Evercore is acting as exclusive financial advisor to Nuance, while Paul, Weiss, Rifkind, Wharton & Garrison is acting as its legal advisor.