Carlo Ancelotti has revealed he lost out to Jurgen Klopp in the race to become Liverpool manager in 2015, and admits the club's owners made the right decision in picking the German.
Following Brendan Rodgers' sacking in October, 2015, Ancelotti held talks about succeeding him, before Liverpool opted to hire Klopp.
Two months later, it was announced Ancelotti was to succeed Pep Guardiola at Bayern Munich at the conclusion of the 2015/16 season.
"It was after [I left] Real Madrid, I had a chat with the owner," Ancelotti said.
"They were looking for a new manager but I think they made a right choice with Jurgen. He is doing fantastic work at Liverpool, so well done."
Ancelotti is the only coach to beat a side managed by Klopp this season. He guided Napoli to a 2-0 Champions League victory against the European champions in September. His side also beat Liverpool last season and earned a draw at Anfield in November.
However, despite his recent success against them, Ancelotti knows Everton must produce a "perfect" performance if they are to win at Anfield for the first time since 1999 when they play in the FA Cup third round on Sunday.
"Jurgen is my friend, we have a good relationship and I had the luck to beat him last season as well, although they won the competition," Ancelotti said.
"At Napoli it was the same, we were able to do a great performance because to beat Liverpool you have to do a great performance, a normal performance is not enough.
"Everything has to be perfect. You must work hard, sacrifice, show intensity - to beat them your game has to be complete.
"You cannot defend for 90 minutes and we do not want to defend for 90 minutes. We want to have the possibility to play our football."
Though Klopp and Ancelotti are rivals on the pitch, they enjoy a good relationship off it and Klopp joked on Friday about inviting the Italian to a party at his house now both are living in Liverpool.
Ancelotti has a glittering CV, having won the Champions League three as a manager with AC Milan and Real Madrid, and it is clear Klopp believes convincing him to come to Goodison Park is a big coup for Everton.
"Carlo Ancelotti is one of the smartest people I have ever met and he wouldn't have taken job if he didn't have a good squad or is convinced that the Everton squad is good," Klopp said.
"It is a really, really good squad [at Everton]. They have made a lot of investments in the transfer market in the last few years.
"It didn't work out for some reasons, but the combination of a good manager and a good squad can help in football."