“Kalina” is a good target for acquisition, if Unilever wants to strengthen its portfolio

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To elaborate decision on “Kalina” acquisition by Unilever, following steps must be performed

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Stand-alone business analysis (concern “Kalina”)

Evaluation of possible bonuses

from synergies

Risk identification and overcome

strategy formation

Financial analysis proves that “Kalina” has high parameters in relation to Russian market

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Financial risk

Debt to equity

2.55

Debt to capital

0.71

Times interest earned

3.69

Indicators are in the normal range

Operating activityanalysis

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

Potential growth of “Kalina” can be calculated with a help of certain indicators

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7%

15%

23%

2,5%

5,4%

8,3%

Growth rateReinvestment rate

Return of equity (ROE) = 0.36

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

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Synergy of logistics includes cost reduction on all stages of buying, delivering, and storage

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220

distribution centers

in CIS

over 100

distribution centers

in CIS

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 GmbHSales of cosmetics and

perfumeryTo dissolve

Unilever has far more

opportunities for activity

on the European market

Rychkon Limited Financial companyTo move and attach to Unilever’s finance

department

Pallada Ukraine Distributor in UkraineTo 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 unitUnilever doesn’t has

analogous product line

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Merger of media and technology results in revenue increase and decrease of costs

media • Unilever is well-known

brand

• Kalina's product linesare well-known

• TV, radio andmagazines spendingscan be decreased

technolo

gy • Kalina's know-how

have to be kept (thesecret formulations ofproducts also)

• The quality of Uniliver'sproduct can byimproved

• New products ofUnilever can berealized with newtechnologies after themerger

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PEST-analysis results reveal risks with high level of influence on business

Group Factor Probability Influence Feedback

Po

litic

al Entry into WTO High, 1-3 year New business rivals Already have the strong market positions

Change of political powerMedium, 1-2

yearNew laws and business rules

Using legal norm based on business

experience in other countries and lobbying

new laws

Eco

no

mic

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 yearPrevent 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 yearImproper previous business

activities of Kalina

Work out in detail the operation history of

Kalina’s accounting department

So

cio

cultu

ral

Healthy life-style trend High, 3-5 yearIncreasing interests to

personal care productsSupply 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-te

ch

Invention of the new

technologies

Medium, 1-2

yearAppearance

Optimize existing technologies and develop

new one to keep market share

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Analysis of the negative risks by their probability and influence shows sustainable deal

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- Administrative obstacles

- Entry into WTO

- New structure of

top-management

- Taxation

- Invention of the new completive

technologies

- Owner change

- Change of politicalpower

Pro

ba

bilit

y

Influence HighLow

Low

High

Influence

Pro

ba

bilit

y

Indicators proving strong position of Kalina on the Russian FMCG market

Type of product

Face care H & B Shampoo + conditioner

Typ

e o

f sh

are

Vo

lum

e sh

are

Val

ue

shar

e

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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

Cost benefit analysis

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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

Operation activity analysis

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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

Financial analysis

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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

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

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