One Equity will pay $800 million in cash and assume MModal's debt, which totaled $297.6 million at the end of March.

The buyer said it will fund the acquisition, valued at $14 per share, through a combination of equity and debt and has received financing commitments from Bank of America Merrill Lynch and RBC Capital Markets Corp. The purchase price represents an 8.3% premium over Modal's closing stock price of $12.93.

As part of the deal, Steven Cohen's hedge fund SAC Private Capital Group LLC, M Modal's largest shareholder with a 31% stake, has agreed to tender its shares.

Modal, of Franklin, Tenn. provides cloud-based transcription services to the healthcare sector, mostly hospitals. The target has about 12,000 employees and holds more than 140 software patents.

"One Equity Partners matches our passion and drive and we believe will be the right financial partner to accelerate our strategic goals," said Modal chairman and CEO Vern Davenport in a statement.

In the first quarter, Modal posted record revenue of $117.4 million, up from $111.2 million in the first quarter of 2011, and adjusted Ebitda of $26.6 million, slightly down from the prior year's $26.7 million. As of March 31, Modal had $37.3 million in cash and $297.6 million in debt, which One Equity said it will look to refinance.

The buyer and seller expect to complete the transaction by the end of the third quarter, pending regulatory approval. Modal's board has already approved the transaction.

Increased government regulation of medical documentation continues to drive demand for medical software programs. In March, Verisk Analytics Inc. acquired venture capital-backed MediConnect Global Inc. for $348.5 million in cash. Around the same time, speech recognition software company Nuance Communications Inc. acquired medical transcription services company Transcend Services Inc. for about $300 million.

Modal shares were trading 8.8% higher to $14.05 on Tuesday morning, with its market capitalization near $800 million. The stock is up 30% this year.

RBC and Macquarie Capital Partners LLC are advising Modal. Macquarie also provided a fairness opinion to its board. Simpson Thacher & Bartlett LLP is representing Modal.

Dechert LLP is providing legal counsel to One Equity.