Software giant Microsoft announced today that it has acquired Nuance Communications in a $16 billion deal.

Microsoft will acquire Nuance for $56 per share, denoting a 23% premium to the closing price of Nuance on Friday, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. Nuance provides tools powered by artificial intelligence (AI) for voice recognition and transcription and is a vendor to banks like Santander UK, Barclays and the Virginia Credit Union.

“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,” Satya Nadella, chief executive at Microsoft, said in a Monday statement.

Nuance’s tools can also be leveraged for enterprise applications like “conversations with financial advisors,” Scott Guthrie, executive vice president of cloud and AI at Microsoft, said during a conference call announcing the acquisition. Ambient AI could document conversations and subsequently offer recommendations, said Guthrie.

The transaction has been unanimously approved by the board of directors of both firms, and the deal is intended to close by the end of this calendar year, subject to approval by Nuance’s shareholders, the statement noted. The acquisition is the second-largest buy Microsoft has made under Nadella, following the $26 billion purchase of LinkedIn in 2016.

“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,” Mark Benjamin, chief executive of Nuance, said in the statement.

Microsoft stated that the acquisition will build on the existing partnership between the two firms first announced in October 2019. The partnership was focused on accelerating the delivery of ambient clinical intelligence (ACI) technologies, tools that function like a digital assistant to listen in to doctor-patient interactions, helping to relay information and convert it into structured notes.

“The acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly $500 billion,” according to Microsoft.

Some of the structural opportunities this acquisition also brings forth include access to Microsoft’s globally scaled cloud infrastructure, field and distribution channels, and the potential to locate new customers and audiences for Nuance’s solutions, he added.

In its Q1 2021 financial results released in February, Nuance reported its highest-ever revenue quarter for enterprises, driven by intelligent engagement solutions. The firm also reported a 28% uptick in health care cloud revenue growth. Going forward, Nuance’s financial results will be reported under Microsoft’s intelligent cloud segment, Microsoft noted.

Nuance also provides AI expertise and customer engagement solutions like virtual assistants and digital and biometric authentication tools to different industries. “This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams, and Dynamics 365,” the statement added.

The acquisition indicates Microsoft’s growing inclination for growth via acquisitions. The tech giant has been reported to be in talks to acquire chat platform Discord for approximately $10 billion, and also purchased video game studio ZeniMax Media for $7.5 billion in September 2020.

Mark Benjamin will remain chief executive of Nuance and report to Scott Guthrie, executive vice president of cloud and AI at Microsoft, according to the statement.

Shares of Nuance [NASDAQ: NUAN] were trading up 16% at 1:40 p.m. in New York, and the firm has a market capitalization of $15.08 billion. Microsoft stock [NASDAQ: MSFT] also registered a slight uptick, 0.50%, by the same time. The software giant has a market capitalization of $1.94 trillion.