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Made be team idP! (idp-crew.com) for Changellenge Moscow - 2013 (semifinal) Theme: M&A (Unilever & Kalina Krasnaya)
Citation preview
“Kalina” is a good target for acquisition, if Unilever wants to strengthen its portfolio
223/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
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
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 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
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
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"
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
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
22/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 8
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
23/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 9
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
1023/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya"
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 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
23/04/13 idp! Crew - Unilever M&A "Kalina Krasnaya" 13
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
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
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
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
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