Glossary

Lehman Formula

The Lehman Formula is a tiered commission structure historically used by investment banks and M&A advisors to calculate success fees on transaction values. The original formula paid 5% on the first million, 4% on the second million, 3% on the third million, 2% on the fourth million, and 1% on amounts above $4 million.

In practice, the Lehman Formula has evolved significantly. For Canadian business brokerage transactions under $4 million, commission rates of 8–12% of the sale price are common — often with a minimum fee floor. For transactions above $4–5 million, advisors typically negotiate custom fee structures or use variations such as the Double Lehman, which doubles each percentage (10-8-6-4-2%).

The Lehman Formula is used as a conceptual reference point in advisor engagement negotiations, not as a fixed standard. Actual fee structures vary by advisor, deal size, transaction complexity, and market conditions.

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