In 2001, Mark Johnston engineered a debt-financed buyout of the hardware division of a UK-based IT company and moved it to Sunnyvale, CA, to be near key partner Sun Microsystems. Incorporated in the U.S. as Tadpole Computer, Tadpole designed rugged mobile servers on a Sun platform for enterprise and government customers. Demand surged in the military for Tadpole's mobile servers in early 2004, but a balance sheet heavy with debt left over from the buyout limited Tadpole's ability to scale for growth.

The Challenge

In early 2004, Mr. Johnston realized Tadpole needed to be re-capitalized to take advantage of growth opportunities in the defense space. Mr. Johnston also wanted to free himself from the burden of personal guarantees he had used to secure the debt for the buyout back in 2001. When Mr. Johnston met Arbor and found their deep understanding of the financial and operational complexities of his business, he engaged them to find the right buyer for his company.

The Solutions

Arbor initially took Tadpole to market in the spring of 2004, but found a tepid market for hardware and a down quarter for Tadpole limited interest in the deal. Arbor advised Mr. Johnston to take Tadpole off the market, execute its plan through 2004, and then reassess the market in early 2005. When Tadpole hit its numbers for 2004 and the market improved, Arbor took Tadpole out again - this time receiving a much stronger reception. General Dynamics, the leading supplier of IT to the US military, outbid other leading defense electronics players and acquired Tadpole in August, 2005.

Arbor Value Add

• Remained fully engaged with Tadpole for 18 months despite the market's initial tepid reaction
• Contacted over 100 potential buyers for the company
• Worked closely with CEO on operations including recruiting new staff members
• Granted no exclusivity to any bidder for Tadpole, leaving the door open for an 11th hour bid which prevailed
• Structured the deal as all-cash, with no earn-out provisions - giving Mr. Johnston and other shareholders maximum liquidity