Microsoft announced on Monday that it will acquire Nuance Communications for $56 per share, a price that is approximately 23% higher than the company’s closing price on Friday. The transaction is valued at approximately $16 billion, with an additional $19 billion in debt.
It’s the latest indication that Microsoft is looking to expand through acquisitions. The company is also rumoured to be in talks to acquire the chat app Discord for around $10 billion. Furthermore, Microsoft attempted to buy TikTok’s US business last year for around $30 billion before the deal fell through.
$26 Billion deal
The Nuance acquisition is Microsoft ‘s largest since it paid more than $26 billion for LinkedIn in 2016. Microsoft completed its $7.6 billion acquisition of Zenimax last month.
Nuance’s stock was up 18% on Monday morning. Microsoft’s stock was slightly higher.
Nuance would be integrated into Microsoft’s business unit that serves businesses and governments. Nuance makes money by selling tools for recognising and transcribing speech in doctor’s appointments, customer service calls, and voicemails. Microsoft stated in its announcement that Nuance’s technology will be used to supplement Microsoft’s cloud products for health care, which were launched last year.
Statements
In an interview with CNBC’s “Squawk on the Street” on Monday, Microsoft CEO Satya Nadella cited Nuance’s health care tools as the primary reason for the acquisition.
“We’ve seen a massive acceleration of digital transformation… especially in health care,” Nadella said. “When it comes to the provider market, digital technology will be critical.”
Nuance reported a net income of $7 million on approximately $346 million in revenue in the fourth quarter of 2020, with revenue declining by 4% on an annualised basis. Nuance was founded in 1992 and employed 7,100 people as of September.
Microsoft announced that Nuance CEO Mark Benjamin will stay with the company and report to Scott Guthrie, who oversees Microsoft’s cloud and artificial intelligence businesses.
Nuance has a strong reputation for its voice recognition technology, and it has long been considered a potential acquisition target by companies such as Apple, Microsoft, and others. Microsoft already has voice recognition built into many of its products, but it recently discontinued some products that included its voice assistant Cortana.
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