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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