Private equity firms take on Content

A syndicate led by Kennet Capital and Cazenove Private Equity has funded Clearswift’s £20.5m purchase of Content Technologies from Baltimore.

Kennet Capital and Cazenove Private Equity are the lead investors in a deal enabling Clearswift, the email manager backed by Amadeus Capital Partners, to buy Content Technologies from Baltimore, the struggling encryption software maker.

The syndicate, which also included venture houses Amadeus and Bank of America Equity Partners, invested a total of £22.2m in Clearswift to fund the acquisition and inject working capital. Kennet and Cazenove invested £7m each, Amadeus invested £6m and Bank of America contributed £1.9m. Individuals also participated.

Clearswift will use the funds to pay Baltimore £12m in cash and a further £8.5m in shares and loan notes for Content.

Amadeus first invested in Clearswift in June 2001 alongside Pino Ventures, an Italian private equity firm, and US group 4C Ventures. Since that time, the company has achieved all the targets set for it, said Amadeus’ Richard Anton. He said: “This merger with a similarly high calibre company brings exceptional synergies for future growth in a worldwide market.”

According to Amadeus, the combined group, operating under the Clearswift name, will have a customer base of more than 11,000 companies including Standard Life, NATO and the Australian Ministry of Defence. Don Taylor, former vice-president at Tumbleweed Communications, will run the business. 

Clearswift will continue to develop content security software, which many consider to be an additional layer of protection against email and Web-based network threats such as viruses.  Such software can also protect firms from legal action over inappropriate use of email or the internet.

David Carratt, managing director of Kennet Capital, said content security has risen to the top of the corporate agenda and that many businesses were applying stringent policies over employees’ use of email and the internet while at work, adding: “This divestiture is clearly indicative of the type of deal opportunities that exist for technology investors in today’s market environment.”

Kennet Capital and Cazenove Private Equity will appoint non-executive directors to the Clearswift board.  Content Technologies’ founder, David Guyatt will also join the board.

Baltimore put Content up for sale last August saying the business did not sit well within its encryption software business. Today’s sale will come as a relief to the company as it continues to fight to break even before its cash runs out.