Two and Twenty

Khajuria spent his career in private equity, including as a partner at Apollo, and wrote this as an insider's explanation of how the industry works and why it earns what it does.

The book is structured around composite deal narratives rather than around analysis. Each chapter follows a transaction type: a distressed credit purchase, a corporate carve-out, a take-private, an insurance transaction, and so on. Through these he explains the mechanics: how deals are sourced, how diligence is conducted under time pressure, how the debt is arranged, how operating improvements are planned and executed, and how the exit is timed.

The title refers to the fee structure, and Khajuria defends it. His argument is that the industry's returns come from work that public market investors do not do: taking control, replacing management, restructuring operations, and holding through periods when a public shareholder would sell. He argues that the alignment created by partners investing their own money in the funds is real and substantial, that the industry's returns have justified the fees historically, and that the criticism generally comes from people who have not seen the work involved.

He is candid about the culture: the hours, the intensity, the concentration of decision-making in a small number of people, and the fact that the industry recruits and rewards on a narrow set of characteristics.

The book is advocacy by a beneficiary of the system it describes. It does not engage seriously with the evidence on returns net of fees relative to public market equivalents, which is contested; with the effect of leverage on portfolio company employees and creditors; with the growth of continuation funds and other liquidity devices; or with the arguments made by critics including Ballou, also in this reference. Read it for the description of the work, which is accurate and rarely written down, and go elsewhere for the assessment.