Understanding the Lehman Formula

The Lehman Formula is a compensation formula originally developed by the Lehman Brothers for investment banking services. This formula is commonly used by merger and acquisition brokers in determining a success fee for the sale of publicly or privately held companies.

Lehman Formula and Our Variation

Typically, a broker will be paid a higher percentage of the first million dollars of selling price and correspondingly lower percentages for each million dollars of consideration thereafter.

At George and Company, we create a custom fee schedule for each client to meet their specific and unique needs. Often we will utilize what is known as a Convex Lehman Formula that is based on a calculation where we are rewarded for bringing a total selling price that is higher than the fair market value of the company. We are confident in our ability to perform to the seller’s expectations, and we are not afraid of charging lower fees in the beginning.

George and Company utilizes a similar fee structure when working the buy-side of a deal as well. If we are engaged by the buyer to represent them, not the seller, we are typically paid based on a Lehman Formula of savings we generate from the asking price if is agreed to be fair market value. Contact us to learn more.

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