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Unilever Lathers Up Alberto-Culver

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Oooh, Alberto!

Unilever (NYSE: UL  ) wants you to have fantastic hair and it wants to be the company that you turn to for that fabulous just-from-the-stylist shine and bounce. Or at least that's what I assume, considering the company agreed to buy Alberto-Culver (NYSE: ACV  ) , the company behind brands like VO5, TRESemme, and Nexxus.

The purchase would add to Unilever's TIGI line of hair-care products, a brand that it purchased in early 2009. It will also continue the company's augmentation of its overall portfolio of personal-care products. This time last year it agreed to snap up Sara Lee's (NYSE: SLE  ) line of personal-care products, an acquisition that's still pending due to competitive concerns.

The acquisition will also give Unilever a more robust portfolio to compete against companies like Procter & Gamble (NYSE: PG  ) -- which has brands such as Vidal Sassoon, Pantene, Head & Shoulders, and Aussie – and L'Oreal -- with Garnier, Redken, and Matrix -- and to a lesser extent Avon (NYSE: AVP  ) .

Why the focus on this area? It's pretty simple actually -- it's a huge, growing market. Referring to Unilever's CEO Paul Polman, Bloomberg noted:

In August, Polman said that he foresaw about 80 percent of so-called organic growth coming from emerging markets, driven by health and personal care. The global personal care market is forecast to grow to $561 billion by 2014, and was valued at $467.3 billion in 2009, according to Datamonitor.

Those are some seriously large numbers, and it seems like ample reason to besiege the sector.

But buying your way into a product category or simply buying growth can be tricky and a lot depends on the acquirer being patient enough to be able to buy its targets at attractive prices. If a company pays too much for an acquisition, it may be able to show investors a bigger bottom line the next year, but at the end of the day management has destroyed shareholder value.

In the case of Unilever gobbling Alberto-Culver, I can't help but think the price they're paying is a bit too generous. No doubt Unilever is eyeing Alberto's snappy expected growth rate, but even with that in the mix the price is tough to stomach.

That means the onus is now on Unilever to do a bang-up job integrating Alberto-Culver and its products so that it can wring as much juice as possible and hopefully justify that hefty price tag.

Investors, meanwhile, should be on alert now. Overpaying for a single fold-in acquisition isn't an unforgivable sin. Making a habit of it, however, is -- even if you do it with fab hair.

Berkshire Hathaway Vice Chairman Charlie Munger may not have fab hair, but he's got a few billion dollars' worth of two cents to share.

Unilever is a Motley Fool Global Gains recommendation. Procter & Gamble and Unilever are Motley Fool Income Investor recommendations. The Fool owns shares of and has written covered calls on Procter & Gamble. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookies were harmed in the making of this article.

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