What happened

Shares of Nuance Communications (NUAN) climbed 16% on Monday after Microsoft (MSFT -0.18%) announced an agreement to purchase the artificial intelligence-powered speech-recognition company. 

So what 

Microsoft will pay $56 per share for Nuance, or roughly 23% above its closing price on Friday. The all-cash deal values the speech technology leader at $19.7 billion when factoring in its debt.

Nuance's tech will bolster Microsoft's healthcare cloud offerings. Its software uses conversational AI to improve the accuracy of its medical transcription services. Its tools are currently used in 77% of U.S. hospitals.

A computer chip is labeled AI.

Image source: Getty Images.

Acquiring Nuance will double Microsoft's total addressable market in the healthcare industry to a staggering $500 billion.

"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 press release. "AI is technology's most important priority, and healthcare is its most urgent application."

The transaction is expected to close by the end of 2021, subject to regulatory and shareholder approval.

Now what

Unlike its rivals Amazon and Alphabet, which have drawn the ire of antitrust regulators, Microsoft has remained on the hunt for large-scale acquisitions. In addition to Nuance, Microsoft is reportedly attempting to buy chat app Discord. It also recently made overtures at social media platforms Pinterest and TikTok. Microsoft, in turn, has emerged as a favored suitor for tech companies seeking a larger partner.

"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," Nuance CEO Mark Benjamin said. "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."