# Lehman Scale

## Definition - What does Lehman Scale mean?

The Lehman Scale is an industry accepted formula used by investment banks, M&A advisory firms, and business brokers to calculate the success fees on a sell-side (or sometimes buy-side) engagement.

The Lehman Scale is calculated based on a percentage of enterprise value as follows:

• 5% of the first \$1,000,000, plus

• 4% of the second \$1,000,000, plus,

• 3% of the third \$1,000,000, plus,

• 2% of the fourth \$1,000,000, plus,

• 1% of the remaining total.

The double Lehman is another variation of the above fee structure where the percentage increments go from 10%, 8%, 6%, 4% to 2%. Most investment banking engagements would also include a non-refundable work fee and a minimum level fee should a transaction close regardless of the transaction size. The size of the deal dictates how negotiable these percentages are.

## Divestopedia explains Lehman Scale

The Lehman Scale calculation provides a starting point for the negotiation of success fees. Usually a business owners will have more negotiating room on success fees the bigger a business gets.

From our experience, reasonable success fees as a percentages of enterprise value would be in the following ranges:

 Enterprise value % success fees Less than \$1 million 8% - 12% Between \$1 million - \$5 million 6% - 8% Between \$5 million - \$10 million 4% - 6% Between \$10 million - \$25 million 4% - 5% Between \$25 million - \$50 million 2.5% - 4% Between \$50 million - \$100 million 2% - 3% Between \$100 million - \$250 million 1.5% - 2.5% Between \$250 million - \$500 million 1% - 2% Between \$500 million - \$1 billion 0.50% - 1.5%
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