Lehman Formula


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Lehman Formula

A formula for determining a broker's commission for exceptionally large transactions. While there are variations on the formula and the numbers involved have changed over the years, the basic concept behind the Lehman formula remains that a broker charges a smaller percentage for each certain dollar amount that the transaction is worth. For example, in its original form, the Lehman formula charged a 5% commission for the first million dollars, 4% for the second million, 3% for the third million, 2% for the fourth million, and, finally, a 1% commission for everything above $4 million. It was developed by Lehman Brothers in the 1970s.
References in periodicals archive ?
A common benchmark for calculating a business valuator's compensation is the Lehman formula, which suggests paying a BV intermediary the sum of 5% of the first million dollars of a transaction's value plus 4% of value between $1 million and $2 million, 3% of value between $2 million and $3 million, 2% of value between $3 million and $4 million, and 1% of value in excess of $4 million.
The standard Lehman formula is 5% on the first million, 4% on the next, and so on, down to a residual 1%.
Our fee structure is different from the Lehman formula.
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