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:
-
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% |