Double Lehman formula: the fee scale, and the two lines that change what it pays
- What the broker is paid, commission plus uncredited retainer
- $90,000
- Commission at that price
- $90,000
- The minimum fee as a percent of your price
- 6
Every figure here comes from the figures you enter and the method stated beside it: your document count, your own hourly worth, your expected price. This site publishes no valuation, no tax position and no legal opinion; what a clause means for your deal is your solicitor's and your accountant's.
The Lehman scale is a sliding success fee that pays a higher percentage on the first part of the price and less on each part above it. The double Lehman doubles those percentages, and variants keep appearing because the original scale was written for transaction sizes that have not existed for decades. For a seller the scale itself is rarely the argument. What decides the cheque are the minimum fee underneath it and how the price it applies to is defined, and both of those are a single sentence each in the engagement letter.
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How a sliding scale works, and why it slides
The fee is calculated in bands: one percentage on the first tranche of the price, a lower one on the next, and so on, with the effective rate falling as the price rises. The point of the structure is that an adviser's work does not double when the price does. A double Lehman simply doubles the percentage in each band, which is a large difference on a small transaction and a modest one on a large transaction, exactly because the top band is where most of a large price sits.
The minimum fee is what a smaller seller actually pays
Almost every engagement carries a minimum, and on a smaller transaction the minimum is the number that binds rather than the scale. It is worth calculating both at the price you expect and at a price well below it, because the second case is where the minimum bites and where owners are most often surprised. This is also the single most negotiable term in the letter, more so than the percentages.
What m&a advisor fees are calculated ON, which is not always the price
Transaction value can be defined as the equity price, or the price plus assumed debt, or plus earn outs that may never be paid, or plus the value of property sold alongside. Each addition raises the fee without raising what reaches the seller. Read the definition of transaction value before the percentages, because a generous-looking scale on a wide definition costs more than a higher scale on a narrow one.
Retainers, credits and the tail, which decide the rest
Whether the retainer is credited against the success fee, and whether it is refundable if nothing sells. Whether a fee is owed on a transaction the adviser did not introduce. And the tail period after termination during which an introduced buyer still triggers a fee. The broker contract worksheet on this site works a price, a percentage, a minimum and a retainer credit together so the three can be compared at several prices rather than one.
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Tell us where you are in selling your business and what you are trying to keep track of.
Double Lehman formula: common questions
What are typical m&a advisory fees on a small transaction?
A retainer, a success fee on a scale, and a minimum underneath it, with the minimum most likely to be the operative number below a certain price. This page does not publish a rate card, because the honest answer is that the scale matters less than the minimum and the definition of transaction value, and those vary more than the percentages do.
Is the double Lehman scale standard?
It is common and it is not a standard. The original scale is decades old, the doubled version is one of several adaptations in use, and there is no body that sets any of them. What that means practically is that quoting the name tells you very little and reading the bands, the minimum and the definition of transaction value tells you everything.
Who can charge a success fee for selling a business?
In the United States an intermediary effecting the transfer of ownership may be operating under the merger and acquisition broker registration exemption at 15 U.S.C. 78o(b)(13), which carries conditions including not taking custody of the funds being exchanged and not representing both sides without written consent. It is a fair question to ask an adviser early, and a straight answer is a good sign.
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