Made be team idP! (idp-crew.com) for Changellenge Moscow - 2013 (semifinal) Theme: M&A (Unilever & Kalina Krasnaya)

2. “Kalina” is a good target for acquisition, if
Unilever wants to strengthen its portfolio
223/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"

3. To elaborate decision on “Kalina” acquisition by
Unilever, following steps must be performed
323/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Stand-alone
business analysis
(concern “Kalina”)
Evaluation of
possible bonuses
from synergies
Risk identification
and overcome
strategy formation

4. Financial analysis proves that “Kalina” has high
parameters in relation to Russian market
423/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Financial risk
Debt to equity
2.55
Debt to capital
0.71
Times interest
earned
3.69
Indicators are in
the normal range
Operating
activity
analysis
Total assets
turnover
1.27
Fixed assets
turnover
5.05
High level of
assets using
Liquidity
analysis
Current ratio
1.93
Quick ratio
0.86
Company can
provide short-
term liabilities in
the best way
Cost benefit
analysis
Return on assets
0.16
Return on equity
0.36
High parameters

5. Potential growth of “Kalina” can be calculated
with a help of certain indicators
523/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
7%
15%
23%
2,5%
5,4%
8,3%
Growth rateReinvestment rate
Return of equity (ROE) = 0.36

6. All the possible synergies can be divided into
three logical groups, as follows:
Synergy
in beneficial
exchange
• Synergy in media buying
• Synergy of working
capital
• Synergy in technologies
Synergy
in restructuring
• Synergy in
administrative costs
• Synergy in reduction of
sales costs
Synergy
in logistics
• Synergy in purchases of
feedstock and packaging
• Synergy in transportation
and storage
• Synergy in distribution
platforms
623/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"

7. Synergy of logistics includes cost reduction on
all stages of buying, delivering, and storage
723/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
220
distribution centers
in CIS
over 100
distribution centers
in CIS

8. Kalina's departments have to be restructured,
according to Unilever's environment
Subsidiary Fields of activity Actions after merger Comments
LLC Concern «Kalina»
Production and sales of
cosmetics and perfumery
To merge with
Unilever department
To restructure
management and to
strengthen sales by
experts from Unilever
Kalina International SA
Management of Group’s
assets in Europe. M&A
department
To dissolve (and
partially merge with
equal Unilever
department)
Presumably, Unilever has
larger similar
departments; part
specializing in Russian
intellectual right may be
retained for consultation
Kalina Overseas Holding
B.V
Protection of intellectual
property
DSN Cosmetics GmbH
Sales of cosmetics and
perfumery
To dissolve
Unilever has far more
opportunities for activity
on the European market
Rychkon Limited Financial company
To move and attach to Unilever’s finance
department
Pallada Ukraine Distributor in Ukraine
To keep unit, possibly
to increase in future
Retain for strengthening
Unilever’s its position in
the Ukrainian market
Glavskazka International
Development and promotion
of brands in kids goods
segment
To keep unit
Unilever doesn’t has
analogous product line
22/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 8

9. Merger of media and technology results in
revenue increase and decrease of costsmedia
• Unilever is well-known
brand
• Kalina's product lines
are well-known
• TV, radio and
magazines spendings
can be decreased
technology
• Kalina's know-how
have to be kept (the
secret formulations of
products also)
• The quality of Uniliver's
product can by
improved
• New products of
Unilever can be
realized with new
technologies after the
merger
23/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 9

10. PEST-analysis results reveal risks with high
level of influence on business
Group Factor Probability Influence Feedback
Political
Entry into WTO High, 1-3 year New business rivals Already have the strong market positions
Change of political power
Medium, 1-2
year
New laws and business rules
Using legal norm based on business
experience in other countries and lobbying
new laws
Economic
New structure of
top-management
High, 1-2year
Inability to manage and
integrate Unilever’s business
processes into Kalina
enterprise
Adaptive structure to Russian specificity
with certain Kalina’s managers
Administrative obstacles High, 2-3 year
Prevent dynamic and stable
growth
Collaboration with different government
departments
Owner change Medium, 1 year
Leak of employees,
employee layoff, quality
decreasing
Carry out proper personnel rating and
making decision in saving staff
Taxation High, 1-2 year
Improper previous business
activities of Kalina
Work out in detail the operation history of
Kalina’s accounting department
Sociocultural
Healthy life-style trend High, 3-5 year
Increasing interests to
personal care products
Supply stable demand
Influence of Unilever
brand’s reputation
Medium, 1-2
year
Growth of loyalty to the
products
Save existing and involve new group of
customers
Hi-tech
Invention of the new
technologies
Medium, 1-2
year
Appearance
Optimize existing technologies and develop
new one to keep market share
1023/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"

11. Analysis of the negative risks by their probability
and influence shows sustainable deal
1123/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
- Administrative
obstacles
- Entry into WTO
- New structure of
top-management
- Taxation
- Invention of the
new completive
technologies
- Owner change
- Change of political
power
Probability
Influence HighLow
Low
High
Influence
Probability

13. Indicators proving strong position of
Kalina on the Russian FMCG market
Type of product
Face care H & B Shampoo + conditioner
Typeofshare
VolumeshareValueshare
23/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 13

14. 1423/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Liquidity analysis
Current ratio = current assets / current liabilities
Current ratio = 5,270,099/ 2,735,563 = 1,93
Quick ratio = (cash+ marketable securities + accounts receivables)/ current liabilities
Quick ratio = (43,920+ 0 + 2,312,441 )/ 2,735,563 = 0,86
Cash ratio = (cash + marketable securities)/current liabilities
Cash ratio = (43,920 + 0)/ 2,735,563 = 0,02
*all calculations in thousands roubles

15. Cost benefit analysis
1523/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Gross profit margin = gross profit / net sales
Gross profit margin = 6 215 426/ 11 672 588 = 0,53
Operating income = 1 508 710
Operating profit margin = operating income/net sales
Operating profit margin = 1 508 710/11 672 588 = 0,13
Net income = 975 347
Net margin = net income/sales
Net margin = 975 347/11 672 588 = 0,08
Average total assets = (7,377,574 + 10,994,742)/2 = 9186158
Return on assets = earnings before interest and taxes/ average total assets
Return on assets = 1 508 710/ 9186158 = 0,16
Return on common equity = (net income )/average common equity
Return on common equity = (971 040)/ 2700792 = 0,36
*all calculations in thousands roubles

16. Operation activity analysis
1623/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Total asset turnover = net sales / average total assets
Total asset turnover = 11 672 588/ 9186158 = 1,27
average net fixed assets = (2,107,475 + 2,519,750)/2 = 2313612,5
Fixed-asset turnover = net sales / average net fixed assets
Fixed-asset turnover = 11 672 588 / 2313612,5 = 5,05
*all calculations in thousands roubles

17. Financial analysis
1723/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
Debt to capital = total debt / total capital
Debt to equity = total debt / total equity
Total debt = current liabilities + long-term liabilities
Total debt = 5300154
Total capital = total debt + stockholders' equity
Total capital = 7377574
Debt to equity = 5300154 / 2077420 = 2,55
Debt to capital = 5300154 / 7377574 = 0,71
Times interest earned = earnings before interest and tax/interest expense
Times interest earned = 1 508 710/408 565 = 3,69
Capital expenditure ratio = cash flow from operations/capital expenditures
Capital expenditure ratio = 583915/(57945+) = 10,07
*all calculations in thousands roubles

18. Team CV
•4-year bachelor of
Department of Software
Engineering, HSE
•Work:
•assistant “Institute for
System Programming”
•Projects:
•project certificate of
company “ROSA”
•Certification:
•IELTS Academic (6.5)
•Certificate of engineering
winter school, HSE
Alexey Lifshits
•4-year bachelor of
•Department of Software
Engineering, HSE
•Projects:
•project certificate of
company “ROSA”
•Certification:
•DSD (Das Deutsche
Sprachdiplom)
•Certificate of engineering
winter school, HSE
Sofya Latkina
•4-year bachelor of
Department of Software
Engineering, HSE
•Work:
•senior developer “Alset
Wellen”
•Projects:
•project certificate of
company “ROSA”
•Certification:
•IELTS Academic (6.5)
Pavel Shilov
•Graduated
bachelor(2011),
Department of Software
Engineering, HSE
•2-year master degree of
Department of Software
Engineering, HSE
•Work:
•senior developer “Alset
Wellen”
•Projects:
•Imagine Cup certificate
•UX 2011 Moscow
certificate
•Certification:
•IELTS General (6.5)
Edward Kagan
23/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 18