What is it?
The Lehman Formula (also known as the Lehman Fee or Lehman Scale) is a commonly used method for defining compensation owed to an investment bank or deal broker for arranging a transaction. In the 70s and 80s, it was commonly used for fundraising and private placement transactions. Today, it is much more common in lower middle market acquisitions. Deal “finders” often charge a Lehman fee, or some version thereof, for making the introduction the buyer and seller. The formula is often modified to fit the situation, such as by doubling the percentages or altering the thresholds.