Rancho Solano Case
Rancho Solano Preparatory School (RSPS), with its new international focus and class ratios of 7:1 continues to be a highly ranked private school in the state of Arizona and was ranked as the third best private school in the state of Arizona with its overall student population of over 1,000 (azcentral.com). However, the July 8, 2014, recommendation by Adam McLaren, the analyst at Moody Analytics, states “Meritas’ rating or outlook could improve if it can organically grow its revenue/earnings through price increases and enrollment growth, and increase size and improve diversification such that debt to EBITDA approaches 5.0 times (including Moody’s standard adjustments) and EBITDA less capex coverage of interest expense is sustained above 1.5 times.” (https://www.moodys.com/research/Moodys-rates-Meritas-2nd-lien-term-loan-Caa2-affirms-B3–PR_302960). Time will tell if the international focus was the right strategic direction for RSPS as well as what lies ahead for the K-12 private school education industry in the state of Arizona.
The board of directors at RSPS has hired you as part of a consulting team to review the situation and present your findings and recommendations. Complete this assignment from the perspective of the hired consultants. Respond to the following questions:
1.Describe at least four factors operating in Rancho Solano’s general environment. Describe the culture of RSPS. How did these influence the decision to close the two campuses in 2014 and consolidate resources? What is your evaluation of the decision made by Dr. Mernard and Meritas?