Jurgen Klopp admits he knew Everton would be Liverpool's "next proper challenger" as soon as Carlo Ancelotti was appointed Toffees boss.
Ancelotti took over after Marco Silva was sacked last December and helped Everton recover from the relegation zone to finish 12th in the Premier League, 50 points behind champions Liverpool.
This season, the three-time Champions League winner has guided his side to the top of the table with four wins from four games – but the Italian faces a huge task on Saturday as the Toffees look for a first Merseyside derby win in a decade.
Previewing the lunchtime clash, Klopp heaped praise on his opposite number and hailed Everton's work in the transfer market.
The German told BBC Football Focus : "What I think about Carlo Ancelloti was never a secret. I couldn't respect him more. He's a wonderful human being.
"When I heard he was going to sign for Everton I thought 'Uhhh, the next proper challenger in line'.
"They did the perfect business in the summer. They found exactly the players that they needed to improve an already pretty good football team.
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"Together, getting more used to what Carlo wants them to do makes them a pretty strong team."
Everton strengthened across the board with the signings of Ben Godfrey, Allan, Abdoulaye Doucoure and James Rodriguez.
But Klopp has been especially impressed by one Toffees star who has been at Goodison Park for a number of seasons.
The Liverpool boss added: "[Dominic] Calvert-Lewin, I really expected him to make big steps in the next few years and he did.
What will the score be in the Merseyside derby? Have your say here.
"And now it all works together – both wings have top-class players with James and Richarlison. Midfield, Allan plus whoever plays there, if it's [Gylfi] Sigurdsson or whoever.
"So it's a really, really good team and the last line works better because in a good team it's easier to defend. That's what you see when you watch Everton, so it will be a really interesting game."
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