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
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%|
Positioning a Business for a Merger or Acquisition (Part 2)
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