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"There is nobody more aware of the fact that a huge number of mergers don't work, and that mergers can be painful, than the people of Content Technologies."

Paul Rutherford, the chief marketing officer of Clearswift, the UK communications security company, which recently completed its acquisition of Content, is not exaggerating. As he speaks, he is making his guests coffee in the corner of the large, deserted Thames Valley offices that were once intended to house hundreds of ambitious security specialists working for encryption specialist Baltimore Technologies and those of its acquisition, Content Technologies. Most of those workers have been fired or were never taken on.

Through an extraordinary series of events, Clearswift, a tiny company with a 20-year lineage, now finds itself taking over part of the offices as its global headquarters; it also finds itself rich in cash, with a strong technology portfolio, and a presence across the US and Europe. Perhaps best of all, it owns the strongest global brand in email security – Content Technologies' MimeSweeper. Analysts concur that the company is now the clear global leader in email content security. And, in clear contrast to deeply troubled Baltimore, it is on cusp of turning profitable.

How Clearswift reached this position is part luck and part inspired judgement, especially on the part of some of Clearswift's financial advisors and investors. For the first 15 years of its life, trading as Net-Tel, the little-known company carried out bespoke security projects, mostly for government and defence. In 1997, it developed its first email filtering product, and by end of the 2000, it was turning over just £2 million (€3.2m).

Then the venture capitalists got interested. With companies such as Content and Baltimore highly valued, founder John Horton began talking to VC firm Amadeus Capital (run by his former boss at Acorn Computers, Herman Hauser). In early 2001, Amadeus led a €11.3 million funding round, with Pino Ventures and 4C Ventures.

Under a new CEO, Don Taylor, Clearswift was given the mission to increase product sales, expand out of the government sector and expand internationally. It made strong but not dramatic progress; sales passed £4 million (€6.5m) in the year to April 2002, and customers such as Standard Life, Vodafone and Marks & Spencer were signed up. But rivals such as Content Technologies, now part of Baltimore, had 10 times the market share. The company, now burning cash, sought a second round of funding to expand. During negotiations for a £15 million (€24.2m) investment in the fall of 2001, one of the advisors suggested buying Content.

It was, at first, considered an absurd suggestion. But Baltimore, which paid £702 million (€1.14bn) for Content in September 2000, was desperate for cash and wanted to bring its costs into line. Helped by a heavyweight team of backers and advisors, such as Bank of America, JP Morgan and Cazenoze, Clearswift made a very low offer € and it was accepted.

Clearswift paid £12 million (€19.4m) in cash and £6 million (€9.7m) in shares, and made a £2 million (€3.2m) loan to Baltimore. At the same time, the company raised another £10 million (€16.1m) for working capital.

The extraordinary synergy between the two companies helped to win the support of investors, and of the wary management of Content Technologies, says Rutherford. Although the two companies were direct competitors, offering products for email filtering, policy management and security, there was almost no product overlap. Mimesweeper, for example, is a high-function but less resilient product, based on a single Windows server, while Clearswift Enterprise Suite is a more rugged, multiple Unix server product. Even their international offices seemed to complement each other.

The big question for the enlarged Clearswift is what it now does with the products. The strategic goal is for the company to "provide tools for security and management of electronic communications" – that means moving beyond email to cover, for example, instant messaging, SMS and multimedia.

In the medium term, it needs to integrate its email products, most likely under the well-known MimeSweeper name. The two companies' products will move to a common underlying architecture early in 2003, with all the products eventually becoming part of one family. Clearswift's low end product, MailGuard, is likely to disappear early on.

Clearswift's executives admit that it has all happened so fast that long-term strategic questions – such as how the technology integrates with, for example, secure system management and e-security suites – have yet to be worked out.

But with a global market share that is now over 30%, and buyers and suppliers all moving much more cautiously, it probably has time to work things out. At present only a tiny fraction of organisations in Europe, and even fewer in the US, use even basic email monitoring. In spite of the crash, this is a market that has yet to take off, and Clearswift is very strongly positioned.