Microsoft has agreed to buy artificial intelligence (AI) speech recognition firm Nuance Communications in an all-cash deal of $19.7bn.

The deal price is inclusive of the net debt of Nuance.

This is the second biggest deal under Microsoft CEO Satya Nadella, after the acquisition of professional network LinkedIn for $26bn in 2016. Since this landmark deal, Microsoft has made over 100 acquisitions in various industries, right from videogaming to healthcare.

Microsoft is making inroads into healthcare industry with industry-specific cloud offerings to hospitals and doctors. Last year, it launched Microsoft Cloud for Healthcare to enhance patient engagement.

Nuance, which is linked to Siri voice technology, was founded in 1993 in Massachusetts, the US.

It has active presence in 28 countries and more than 1,500 employees. Besides conversational AI, it provides cloud-based ambient clinical intelligence for healthcare providers.

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Among its offerings include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, with all its clinical speech recognition SaaS products built on Microsoft Azure.

The solutions offered by Nuance work seamlessly with important healthcare systems, including Electronic Health Records (EHRs).

These offerings are aimed at alleviating the burden of clinical documentation, which in turn enables healthcare providers to deliver better patient experiences.

Currently, Nuance solutions are used by over 55% of doctors, 75% of radiologists and in 77% of hospitals in the US.

This transaction builds on the partnership between the firms that was announced in 2019. The firms have been working on AI software that aids in capturing patient discussions and then integrating them into EHRs. This partnership also helped bring Nuance’s products into Microsoft’s Team chat app for telehealth appointments.

By enhancing the Microsoft Cloud for Healthcare with Nuance’s solutions, and leveraging Nuance’s expertise and relationships with EHR systems providers, Microsoft expects this deal to “empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services”.

The deal will double Microsoft’s total addressable market in the healthcare industry to almost $500bn.

After receipt of approval from Nuance’s shareholders, satisfaction of certain regulatory approvals, and other customary closing conditions, the deal is expected to close this year.

Nuance CEO Mark Benjamin will continue to retain his position, but will report to Microsoft Cloud & AI executive vice president Scott Guthrie.

Nadella said: “Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI.

“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.”

In addition to healthcare, Nuance offers AI expertise and customer engagement solutions across interactive voice response, virtual assistants, and digital and biometric solutions to firms across all industries in the world.

Benjamin said: “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.

“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.”