Financial Training: Income/Outcome

Armillary has had a very busy Income/Outcome year already.  We normally deliver about 8 – 12 courses a year, and already we’ve hosted seven simulations in the 8 months to August.

The Income/Outcome proposition plays a unique role in the way we engage with businesses and government organisations that are looking to upskill their staff in all facets of business and financial acumen.

Given Armillary’s extensive background in M&A, debt advisory, and overall corporate finance activity, we use the Income/Outcome business simulation not only to showcase all the core concepts and elements of Income/Outcome, but we also use it to demonstrate some of the less tangible financial concepts that often fall outside of the scope of traditional financial training formats.

Just like in the real world, there are always winners and losers in the simulation, and when Armillary runs a simulation, the endpoints of each team’s business serve as learning opportunities beyond the standard scope of the simulation. These simulation endings include the following:

Leveraged Buy-Out

By the end of the Income/Outcome simulation, we allow the winner to choose which one of the competitors they would like to buy in an M&A transaction. This gives our experienced team a chance to discuss the various elements of the M&A process and the keys to a successful transaction. From pricing a business, raising capital, right through to the allocation of shares in the newly merged company. This gives insight into a side of business that many entrepreneurs want to face at some point in their careers, but, relatively few get such early insights.

Fully Imputed Dividends

Once the M&A activity has been worked through, we’ll take the next best performing company and run through how to pay a fully imputed dividend to the shareholders of the company. We discuss a prudent amount to pay in dividends and the impact this will have on the company balance sheet and cash flow statement. Tax obligations also arise from this scenario and are highlighted through the unique functionality of the simulation’s board structure.

Solvent Liquidations

Valuable lessons still exist in the remaining businesses that didn’t perform as well as the others. Solvent liquidations can be a reality that many business owners face if they haven’t thought through issues such as succession planning - so we show the attendees how the liquidation process unfolds. In most cases, it is a solvent liquidation, which opens up discussion amongst the group about the difference between solvent and insolvent liquidations, and how this is often the de-facto exit strategy for business owners.  Typically, the ‘shareholders’ end up with more than their original expectation, but we work through how this is a sub-optimal strategy.

Mezzanine Debt

In exceptional circumstances, firms fail to meet the requirements for a bank loan and may be forced to sell or liquidate. This provides an opportunity to showcase a wider array of funding options available to businesses and mezzanine debt is often used as an example. Whilst this example is only rarely used in our simulation, it is helpful for entrepreneurs to get exposure to less well-known forms of funding, and to understand how these forms of funding are reflected on a company balance sheet.

For more information on our Income/Outcome simulations and financial training, please get in contact with us at info@armillary.co.nz.