Microsoft Agrees to Buy Voice Recognition Software Maker for $19.7 Billion

Microsoft Pays a Premium

Microsoft (MSFT) is spending $19.7 billion to acquire Nuance Communications (NUAN), a speech recognition software company. Terms of the deal call for Microsoft to pay $56 per share of Nuance. The all-cash transaction values Nuance, including debt, at a 23% premium from its closing stock price Friday. Nuance’s shares surged on news of the deal.

Nuance is a pioneer in the voice recognition industry. It provided the original software for Apple’s (AAPL) Siri before Apple developed an in-house version of the technology. More recently, Nuance has shifted its focus to healthcare and customer engagement.

Microsoft Focuses on Voice Recognition for Businesses

Nuance explored a possible sale seven years ago to both Samsung Electronics and to a private equity firm, but these deals did not end up materializing. Voice recognition software has become a much more important part of the technology industry since then.

Microsoft already has a presence in the voice recognition space, but the company has shifted its focus away from trying to compete with Google and Amazon in the consumer market. Instead, Microsoft is using its voice recognition technology to provide support for its business software. The acquisition of Nuance is part of that strategy.

Microsoft’s Buying Spree

If the deal to purchase Nuance is completed, it will mark Microsoft’s second-largest acquisition since buying LinkedIn for $26 billion in 2016. The company has been on somewhat of a buying spree ever since Satya Nadella became CEO in 2014. Nadella engineered a $2.5 billion acquisition of the popular video game Minecraft, and spent $7.5 billion to acquire IT service management company GitHub. In 2020 it acquired video game maker ZeniMax for $7.5 billion.

Not all of Microsoft’s acquisition efforts have panned out. The company tried but failed to acquire part of TikTok and held talks with messaging platform Discord. Both investors and consumers will be eager to see how Microsoft’s acquisition of Nuance unfolds. The companies have said they expect approval to come from regulators and Nuance shareholders before the end of the year.

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