Microsoft will buy AI firm Nuance for $19.7 billion to bolster healthcare tech

• Microsoft has agreed to buy Nuance Communications for $19.7 billion.
• Microsoft intends to integrate Nuance's technology into its healthcare-specific cloud strategy.
• The acquisition is Microsoft's second-largest after the $24 billion purchase of LinkedIn.

Microsoft has agreed to buy the AI and voice communications firm Nuance for $19.7 billion.

The deal, expected to close at the end of the year, would value Nuance at $56 per share, implying a premium of 23% to the stock's closing price on April 9.

Nuance is Microsoft's second largest acquisition after its $24 billion purchase of LinkedIn in 2016.

Nuance's speech recognition engine is the basis for Apple's voice assistant Siri, and the company has developed Dragon Naturally Speaking voice technology products.

Microsoft intends to integrate Nuance's technology into its healthcare-specific cloud strategy. More than half of physicians and 77% of US hospitals use Nuance's technology, according to a release. Revenue for Nuance's Healthcare Cloud grew 37% year-over-year at the end of 2020.

"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 a statement. "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 in Healthcare and Nuance."

Nadella told CNBC he expects the pandemic to accelerate the "digital transformation" of healthcare, and improving health outcomes will require help from tech companies.

"Not only will we be able to serve all the providers with everything we do in Microsoft 365 dynamics, 365 Azure, but Nuance will be able to help us deliver these AI-first solutions for doctors and radiologists and overall clinical decision support in partnership with the rest of the ecosystem," Nadella said.

Nuance CEO Mark Benjamin, who will remain at the helm after the deal with Microsoft closes, said the partnership will allow the firm to hyper-scale existing technology on a global scale and provide better access to care.

Benjamin added that he hopes to decrease burnout among physicians by reducing the amount of charting, which tends to add two hours of work per one hour of patient care.

"We believe that our solutions coupled with Microsoft's platform and capabilities will bring actually the practice of medicine back to that intimate physician, patient interaction, and really reduce that administrative burden," Benjamin told CNBC.