Lehman scale Investment Banking

Definition

Often used formula for determining a banker's fee for handling a successful client engagement.

The Lehman scale formula is based on a transaction's total value and equals the sum of;

5% of the first $1,000,000, +

4% of the second $1,000,000, +

3% of the third $1,000,000, +

2% of the fourth $1,000,000, +

1% of the remaining total

For example, on a transaction valued at $10 million, a banker using the Lehman formula would generate a fee of;

$50,000 (5% of $1,000,000) +

$40,000 (4% of $1,000,001 to $2,000,000) +

$30,000 (3% of $2,000,001 to $3,000,000)+

$20,000 (2% of $3,000,001 to $4,000,000) +

$60,000 (1% of $4,000,001 to $10,000,000)

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$200,000

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