# Lehman Scale

Last updated: March 22, 2024

## 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%