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Book Summary: Two and Twenty – How the Masters of Private Equity Always Win

Two and Twenty (2022) provides an up-close-and-personal account of the mysterious world of private equity. It gives insights into this unique branch of the finance sector and explains what sets it apart from other investment models.

Book Summary: Two and Twenty - How the Masters of Private Equity Always Win

Content Summary

Introduction: A backstage pass to the world of private equity.
Private equity is extreme asset flipping.
Private equity is the hottest gig in town.
Private equity firms are worlds away from Wall Street.
Only the elite become private equity masters.
About the author
Table of Contents
Video and Podcast
Read an Excerpt/PDF Preview


Money, Investments, Economics, Finance, Private Equity, Venture Capital, Business Decision Making, Business Motivation, Self-Improvement

Introduction: A backstage pass to the world of private equity.

We all love rags-to-riches tales. They inspire fantasies not just of plenty, but of hope. If someone else can turn nothing into abundance, perhaps we can too.

Yet the bulk of us sour when the rich become richer. We hear about founders and partners jetting about in private planes and earning salaries in the hundreds of millions – all by leveraging investments that aren’t their own – and it just doesn’t seem fair. In fact, it feels undeserved and selfish. It’s attitudes like these that have given private equity a bad rap.

But on what basis are these hard feelings being formed? And are they justified? Because when it comes to private equity, most people don’t actually know what goes on behind the scenes – or what it really takes to be successful in the field. And curiously, most of us don’t even realize just how tied to private equity we already are, whether or not we have investments.

This summary to Sachin Khajuria’s Two and Twenty is your backstage pass into the world of private equity. Find out what it is, how it works, and what it takes to succeed in this specialized, secretive financial field.

Private equity is extreme asset flipping.

You’ve probably seen those real estate “flip” shows on TV – the ones where an aesthetically pleasing couple buy a run-down property in an up-and-coming suburb. Over the course of an hour, you watch them demolish a wall here, build a deck there, and encounter a few hiccups like bad weather or unexpected costs. As the episode nears its end, you’re given a virtual tour of a slick new property, complete with designer furnishings and impressive landscaping. Then the auction begins. The house sells for a huge profit, and the couple is flush with cash, ready to seek out their next project.

In a way, private equity is the same – only the stakes are much, much higher. And, of course, instead of playing with a few hundred thousand dollars, you’re flipping assets worth millions.

So, what exactly is private equity?

In simple terms, private equity is a type of financial investment, in the same way that buying shares or putting savings in a high-interest account are types of investments. People use private equity to turn the money they have into even more money.

Sounds great, right? Especially if you’re someone who doesn’t have a regular paycheck, like a retiree. You want the money you have to support you for as long as possible, by multiplying as much as possible.

But one thing that distinguishes private equity from other types of financial investments is risk. First, you need a huge chunk of money to play this game – much more than if you were just buying a few shares independently. Why? Well, private equity typically involves flipping entire companies. These companies are usually in a state of crisis: they’re facing bankruptcy, or they’ve lost the bulk of their customers to competitors, or they’ve failed to modernize and can’t deliver anymore.

You might be wondering why anyone would invest in a company like that. The reason is potential. A private equity firm is one that makes investments on behalf of other organizations who represent individuals – like pension funds. The firm will see the ailing company as an opportunity. Its dire circumstances will make it cheap to purchase, and the firm will have an expert team who can guide it back to health – like those house-flippers who turn a dump into a palace. But even more than that, the team will transform the company into a business opportunity that the market salivates over. At the right moment, the firm will sell and walk away with double or triple what they paid. They win, the company wins, and, most importantly, the private investors that the firm represents win.

So, why is this risky?

Well, again, you need a lot of money in the pot to not only purchase an ailing company, but nurture it back to health over several years. That money, don’t forget, often belongs to retirees living on a fixed income. And unlike the stock exchange, where you can buy or sell at any time, investors can’t withdraw their money from a private equity investment scheme for an agreed period of time. This timeframe will be years – long enough to get the ailing company back on its feet. Finally, there’s always the risk that the flipped company won’t become profitable and gain a high purchase price, in which case the investment might only break even – or worse, it could sell for a loss. So, while private equity reaps investors high returns when it’s a success, when it fails, it fails dramatically.

But it’s the promise of those high rewards – and maybe even the adrenaline rush of those high stakes – that make private equity so tempting for investors and professionals alike.

Private equity is the hottest gig in town.

There’s a lot of buzz around private equity, and most of it has to do with money. Let’s look at some figures so you can appreciate why.

In the past decade, private equity has doubled to become a $12 trillion industry. Yep – that’s right. Not million, not billion – trillion. And in the decade ahead, it’s likely to double again.

Private equity is happening across the globe, embedded in our daily lives without us even knowing. You’re not going to know if a private equity firm is flipping the dating app you’re using, or has just bought the supermarket chain you shop at, or is using your pension fund to purchase a media services company with the goal of doubling your investment in a few years.

Demand for private equity has made dozens of firms spring up, but twelve major firms sit at the apex of the industry – including Blackstone, which manages around $875 billion in assets. That’s a lot of money . . . and a lot of responsibility to make the right calls for investors.

Now that you’re aware of the scale of money that’s at play, let’s look into another aspect of this industry that adds to its allure – its payment model.

Partners at private equity firms – the professionals making the big calls on which companies to invest in and when major deals should be made – are paid on the basis of “two and twenty.” They charge clients an annual fee of 2 percent of the capital invested, plus 20 percent of any profits. This money is divided among the team at the firm, meaning that everyone’s income and wealth is tied to the firm’s performance. A win for investors means a win for everyone.

Now, 2 percent might not sound like much, but don’t forget what kind of figures we’re talking about here. Two percent of $875 billion is more money than most of us will see in a lifetime. That’s what automatically gets paid to each firm annually. And 20 percent of profits – well, this is why senior partners in private equity are worth $100 million by the time they hit their forties.

With firms managing assets worth such staggering amounts, you might think that they have huge teams, which would dilute how much ends up in everyone’s bank account. But surprisingly, the opposite is true – and it has nothing to do with greed.

Private equity firms are worlds away from Wall Street.

Let’s take a quick tour through a typical private equity firm so you can get a sense of how they operate.

A career in private equity isn’t mainstream – it’s elite – and everything about it reflects this. We’ll dig a bit deeper into what makes it so elite soon, but let’s just focus on the basics for now.

The firm you’re visiting will likely have an exclusive address. If you’re in Manhattan, you won’t find it near Wall Street. You’ll need to travel north. In fact, you’ll probably find yourself on a street that flanks Central Park, where the firm’s boardroom enjoys the best views in town.

When you arrive, you’ll encounter heavy security. Confidentiality is nonnegotiable in private equity. If a rival firm gets tipped off about your business strategies, they’ll potentially try to buy the companies you have your eye on before you do, either stealing them from under your nose or bumping up that initial price tag by bidding against you. And that’s going to negatively impact your whole plan. Remember, it’s all about buying low and selling high.

Once you’re ushered into the office space, you’ll find yourself in a quiet, highly focused environment. The furnishing will speak of quality and functionality, and the massive kitchen will catch your eye. You’ll notice it’s fully stocked with an array of nutritious options and a top-notch coffee machine, so you don’t need to duck out for sustenance while you work.

The founder will have the largest office, but you likely won’t catch a glimpse inside. They’ll be busy having face-to-face discussions with the firm’s partners. This is standard practice rather than phone calls or emails – again, it’s all about confidentiality.

There might be about 20 or so partners in the firm, and their doors will be open to encourage transparency and collaboration. You’ll even hear a few talking to each other in a candid, serious way.

Each partner has a deal team that sits in nearby cubicles. The deal team’s job is to research every tiny detail about a company’s financial health and feed this information forward to the partner, who’ll then pitch the proposed deal to the founder. Collectively, the deal team is made up of four professionals, each with a different level of experience: an analyst, a mid-level associate, a junior partner, and a senior counsel. This team is responsible for strategizing deals and business plans worth billions. Keeping the team tight and lean means everyone gets a bigger chunk of the profits – but more importantly, it makes the team agile. Informed, quick decisions are what counts, and being close-knit makes that possible.

This small team structure means that every member has a huge amount of responsibility. There’s no one to step in or bail you out if you make a mistake that might cost you billions. That’s partly why a career in private equity is only for the select few.

Only the elite become private equity masters.

Let’s use a fictional sketch to explore what it takes to be successful in the world of private equity.

Let’s say you’ve just landed a job as an associate in a top-tier firm. First – congratulations! You’ve just come to the end of a 12-month interview process, which has included two months of secret meetings with 20 different senior investment partners who’ve drilled you in every aspect of the industry. And you’ve been doing this while holding down a job as a financial analyst at Goldman Sachs – which you landed two years ago after graduating at the top of your class at Wharton. The punishing hours you’ve been putting in are just a taste of your new career path. It’ll demand that you work until midnight most nights – lucky there’s that well-stocked kitchen in your office – and you’ll typically work most weekends too. Good thing you’re ambitious and hardworking. You’re going to need to keep your eye on the prize.

Your new boss – a senior partner at the firm – throws you straight into your role. She has her eye on a supermarket chain called Foodmart. A family business, Foodmart has been selling groceries and staples at affordable prices in middle-class cities across the US for decades. But they failed to modernize. And when the Covid pandemic hit, they couldn’t compete with online stores offering home delivery.

Your first task will be research. You’ll need to report on every aspect of the business – its financial state, assets, liabilities, opportunities, management team, inventory, supply chains, marketing . . . everything. You’ll do the same for its competitors, until you know the whole sector intimately. But this is your jam. You love working with data, and you revel in complexity. When you’re finished, you’ll have produced reports hundreds of pages long. Your deal team will use them to develop a strategy – a business plan of how to flip Foodmart from bankruptcy to a market leader.

This is where the fun begins – interrogating all the potential options that might transform Foodmart, and running analyses of how these different options would play out financially. After all, your objective is to make profit, so your team needs to be confident in its decisions. You and your team will play devil’s advocate, picking apart each other’s business proposals and looking for weaknesses or blind spots. You’ll unearth every hole in your plan through rigorous cross-examination. This is also exactly what the senior partners and founder will do when your boss pitches her proposal to buy Foodmart to them – so it’s crucial that she’s thoroughly prepared.

It seems like your methodical, analytical approach has paid off – along with all those late nights. The founder gives your team the thumbs-up, and your boss negotiates the deal. Now, the real work starts. You spend the next 18 months working hard to transition an outdated grocery chain into an upscale, service-focused brand called Farmfresh. This means restructuring management, redesigning infrastructure, and repositioning the company in the niche market of fresh, organic produce.

Customers love the new membership scheme and the advice provided by in-store specialists. The free food-tastings add a sense of quality to the experience as well. Two years after the initial deal, stocks have risen by 30 percent and the firm has tripled the investment they’ve made. Your boss negotiates the company’s sale for a 300 percent profit, and you find yourself in line for a very respectful bonus. It amazes you that a team of just four people has pulled off such a feat. In your opinion, this – along with years of working 18-hour days, seven days a week – justifies the wealth-inducing “two and twenty” payment model.


When it comes to private equity, losing isn’t an option. Profits aside, protecting a client’s investment is paramount – not just for the sake of a firm’s own success and reputation, but because millions of pensioners are relying on that investment to support themselves. Your clients are paying a premium price for your services. So if you can’t promise them success, they should take their investments elsewhere.

That’s why private equity attracts determined individuals who know how to take calculated, imaginative risks. Success is the result of years of dedicated, hard work that demands massive personal sacrifice. But it’s not just the lure of profits that draws people to this career. What keeps professionals in the business long after they’re millionaires is the satisfaction of seeing opportunity where others see failure and crisis, and transforming it into a win that everyone benefits from.

About the author

Sachin Khajuria is a former partner at Apollo, one of the world’s largest alternative asset management firms, and is also an investor in funds managed by Blackstone and Carlyle, among other investment firms. He has twenty-five years of investment and finance experience. Sachin holds two degrees in economics from the University of Cambridge. He divides his time between New York, Switzerland, and London.

Sachin Khajuria | LinkedIn
Sachin Khajuria | Achilles

Sachin Khajuria

Table of Contents

Preface xi
1 The Best Game in Town 3
2 We Don’t Sell Plain Vanilla 21
3 Behind the Curtain 41
4 We Eat Our Own Cooking 63
5 Running into a Burning Building 79
6 There Is No Formula 98
7 Never React, Always Respond 116
8 If You Don’t Ask, You Don’t Win 131
9 How to Make More 146
10 Desperation, Not Hunger 162
11 The Library 178
12 Stack the Deck 195
13 The Edge 212
Conclusion: The Age of Big Finance 227
Acknowledgments 233
An Everyday Private Equity Glossary 235


The first true insider’s account of private equity, revealing what it takes to thrive among the world’s hungriest dealmakers

Private equity was once an investment niche. Today, the wealth controlled by its leading firms surpasses the GDP of some nations. Private equity has overtaken investment banking—and well-known names like Goldman Sachs and Morgan Stanley—as the premier destination for ambitious financial talent, as well as the investment dollars of some of the world’s largest pension funds, sovereign wealth funds, and endowments. At the industry’s pinnacle are the firms’ partners, happy to earn “two and twenty”—that is, a flat yearly fee of 2 percent of a fund’s capital, on top of 20 percent of the investment spoils.

Private equity has succeeded in near-stealth—until now. In Two and Twenty, Sachin Khajuria, a former partner at Apollo, gives readers an unprecedented view inside this opaque global economic engine, which plays a vital role underpinning our retirement systems. From illuminating the rituals of firms’ all-powerful investment committees to exploring key precepts (“think like a principal, not an advisor”), Khajuria brings the traits, culture, and temperament of the industry’s leading practitioners to life through a series of vivid and unvarnished deal sketches.

Two and Twenty is an unflinching examination of the mindset that drives the world’s most aggressive financial animals to consistently deliver market-beating returns.


“Brilliant . . . eloquently takes readers inside the heroic world of private equity . . . [an] essential read.”—Forbes


“A true insider’s account of the industry.”—Fortune

“It cannot be stressed enough how much [Two and Twenty] is needed. . . . Private equity investors are not overpaid, nor are they avoiding taxes on our backs. In reality they’re heroes. Read Sachin Khajuria’s excellent and essential book to understand why.”—Forbes

“Khajuria believes private equity deserves to be defended. . . . [Deal] sketches supply helpful information about the structure of private equity funds. . . . The vignettes enable Khajuria to show the wide range of industries and transactions in which private equity now operates. . . . He suggests that private equity is too big and has insinuated itself too deeply into American life to be stopped. That may be the book’s most persuasive point.” —The Wall Street Journal

“[Two and Twenty is] an excellent primer on the industry, from how things work at the very top to the nuts and bolts of its vast influence around the globe.”—Bloomberg Businessweek

“[Sachin Khajuria] demystifies the private equity world.”—Financial Times

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Chapter One: The Best Game in Town

The world economy is broken. Underlying fissures created by subprime mortgage losses have cracked open, with a devastating effect on the global financial system. Ordinary citizens are staring down the barrel of an ugly recession. Unemployment is soaring, on an unshakable course to double digits, and homeowners are drowning in foreclosure. The Federal Reserve has slashed interest rates as a credit crunch grips. Governments are forced to turn to their tools of last resort: colossal stimulus measures and nationalization plans to save households and corporations. Then, a week after the U.S. government is forced to bail out mortgage backers Fannie Mae and Freddie Mac, the unthinkable happens: Lehman Brothers, a major investment bank, files for bankruptcy. It is the largest bankruptcy in history.

It is 2008.

Inside the oak-­paneled boardroom on the thirty-­seventh floor of the Seagram Building in Midtown Manhattan, eleven partners of a well-­known private equity firm discuss these events, what might happen next, and how they can profit from the crisis. One of the firm’s investors is a German retirement fund for state employees, where the average salary is thirty thousand euros per year. These government workers in Bavaria have no idea that there is an ultra-­wealthy asset manager in New York working hard on their behalf. Right now the firm is hunting for a smart bargain in their hometown, Munich.

The Founder of the Firm sits at the head of the oval French walnut table that dominates the room. Ten chairs are arranged for the other partners to use. These seats are made of the same elegant wood as the table but without armrests. The Founder’s chair is different. It is made of a titanium alloy, like the million-­dollar staircase in the lobby of the Firm’s offices, and it pivots and reclines with ease—more throne than seat. No one dares occupy it when the Founder is absent. The spotlights are so bright that they would not look out of place in an emergency room. Through the floor-­to-­ceiling windows, those assembled are able to survey the riches of Park Avenue, with its European boutiques and attractive layout, but with the world economy hanging in the balance, no one has the time to soak in the view.

It is 11:45 a.m., and the Founder’s schedule since he woke up six hours ago has been packed: a short helicopter ride from his beachfront residence in the Hamptons to New York, a competitive hour of tennis with a high-­seeded U.S. Open player, and, over a light breakfast in a private dining room at the Harvard Club, a review of current economic data with a member of the board of the Federal Reserve.

The Founder has been a billionaire since his early forties. He is calm and assured, and he starts to talk to the room—to no one in particular and at the same time to all those assembled. His tone is soft, and his words are precise. His manner is awkward but commandingly so, a mix of deep experience and palpable threat. He leans forward as he speaks, resting his manicured hands on the yellow legal notepads and thick printouts of Excel models that cover the boardroom table in front of him. He dispenses his views with conviction, without hesitation or emotion, as if they are statements of fact rather than opinion. In over thirty years, he has lost money on deals just twice, and he displays the rarefied confidence of one who has earned the respect of others—even of his enemies. Amid the social and economic catastrophe raging outside the Firm, while everybody is preoccupied and nobody is watching, he is considering a new investment.

“I’ve seen this movie before,” he says. “Europe is a few short months behind the U.S. They will get hit hard—I think extremely hard—and they won’t know what hit them until it’s too late. We finalize our preparations to buy soon, because the price of these securities will be in free fall. Let’s get ready.”

Although the facial expressions of his colleagues are stone-­cold, like the air in the building, they know the Founder is right. His partners at the Firm and the fifteen midlevel and junior executives sitting at the outer edge of the room digest the Founder’s order and plot the micro steps of how to execute it. Their eyes are sharp and their heads are turned, making sure they catch every nuance and gesture from the Founder as if they were made of pure gold. Everyone is wearing bespoke suits and expensive loafers, but the partners skip the ties. Three of the Firm’s lawyers are writing down notes off to the side, and their presence and occasional advice confers upon the discussion the privacy and confidentiality benefits of attorney-­client privilege.

This is the Firm’s investment committee, the decision-­making body made up of the partners as voting members and the rest of the Firm as observers and commentators. The committee meets every Monday, without fail, at 10:00 a.m. Eastern Time. For the last ninety minutes, the committee has torn apart the analysis contained in a forty-­six-­page investment memo for this prospective deal carefully put together by a deal team of three investment professionals. The team toiled around the clock for ten days to assemble the memo. This involved feedback calls on the last draft with each of the partners, as well as soliciting guidance from the Founder, before circulating a final version a few nights before. The investment memo contains concise inputs and exhaustive appendices from consultants, accountants, and lawyers, and finance terms from Wall Street’s biggest banks, but it is the committee’s dispassionate analysis of the deal that will drive the decision whether to proceed.

That judgment rests on the quality of replies to searing questions put to the deal team as a unit by the partners and a calibrated weighing up of whether the Firm’s investors will be adequately compensated for the risks of the bet. Whether it’s worth proceeding.

Over the weekend, the deal team fielded last-­minute inquiries from every member of the committee. Some of the incoming commentary was hostile and cut open weaknesses in their work, meaning they would need to pull another all-­nighter to prepare an addendum to the memo. Some feedback was encouraging and gave them confidence ahead of the meeting. Taken together, the input was meant to help the group get to the right answer about next steps, whether to proceed and, if so, on what terms. This is the birthing process of a private equity deal—a process designed to reveal the truth of the investment question at hand. But given the Founder’s remarks, the iterative calculus of do or don’t do is over—the approval to commit has been given in the guise of a friendly suggestion. The deal team must be ready to enter the market and buy quickly, without fear. It is time to be ruthless.

The target is called TV Corp, the largest free-­to-­air TV and radio broadcaster in Germany. The company was formerly owned by the Firm and is now publicly listed; vast files of information on the business and its competitors sit in the Firm’s archives. What’s more, the Firm has kept an eye on the company even after selling it off. Every quarter since exiting the business three years ago, the Firm’s analysts have collected operating and financial data from relevant sectors of the economy, such as advertising and Hollywood movies, and processed them into financial models. Friendly senior corporate executives provide timely commentary on what is happening on the shop floor in TV and radio broadcasting, helping to ensure that the Firm is well-­informed on significant facts and trends that are relevant to TV Corp. The information set is also enriched by deals the Firm has analyzed but not closed in adjacent sectors of the economy or in neighboring markets, either because the terms were not right or because a rival beat the Firm to it. This includes potential investments in TV and radio stations in France and in Scandinavia, possible deals involving broadcast towers in the UK, and the failed acquisition of a consumer goods company in northern Europe that would advertise on channels such as those TV Corp runs.

And so, by staying current, by keeping abreast even after the first investment in the target is long gone, the Firm can analyze everything relevant to the company’s fortunes going forward in real time—from how much Procter & Gamble will spend on commercials for shampoo to the cost of screening Hollywood blockbusters to the reaction of trade unions and politicians to job cuts and restructurings. The data and the Firm’s history with the target have tipped the scales in the Firm’s favor. The Founder is in a strong position to make an audacious move on the company again—this time during a global economic earthquake, when nobody else is paying attention.