Double Lehman Explained

We use a Double Lehman fee structure for helping sell our customers business. A few of our clients are aware of the Double Lehman structure plus some others have heard about Lehman formula plus some have not heard about either of the fee structures. Lehman Formula, a precursor to Double Lehman, is a settlement framework produced by Lehman Brothers many years back for investment banking services. 5 million of transaction value.

1.1 million, or 1.1% of the transaction value. On the years, as inflation kicked in and as the complexity of the offers grew, this fee structure has progressed. In modern investment banking transactions, this Lehman structure is augmented by upfront charge heavily, retainers, hourly charge and other fee to pay for the expenses in the transaction.

For large offers, the Lehman Formula provides huge fees and national M&A companies such as Goldman Sachs, Merrill Lynch compete to earn these deals. These deals are highly customized and the M&A companies’ compensation tend to be tailored per the aim of the deal. Typical time for you to consummate these offers is between one and 2 yrs which is common for investment bankers to derive most of their income from in advance fee and regular monthly/hourly fee some time before the deal consummates.

On the other end of the transaction size spectrum, business brokers typically charge 10-12% of the transaction proceeds. These deals tend to close in a matter of a few agents and weeks derive most, if not all, of their fees at the shutting of the purchase. Mid market M&A specialists have a challenge in the sense that the work of closing mid market deals is often as difficult as or more difficult than for larger deals. The time taken up to consummate the transactions is also similar compared to that of the bigger offers.

Lehman had not been developed for these smaller deals and working at the payment level implied by Lehman is untenable for M&A companies. Alternatively, charging clients 10-12% fee as business brokers charge can be detrimental to the interest of your client offering a multi-million money business. Dual Lehman is a settlement structure created by M&A specialists to solve this nagging problem.

5 million deal (6% of purchase value). 600,000 (3% of purchase value). Because of the complexity of the deal and the passage of time it takes to consummate the purchase, mid market M&A professionals typically charge upfront fees and retainers in addition to the Double Lehman based fee structure. Bottom Line: The Double Lehman is a convenient way to start discussions regarding M&A specialist compensation for selling mid-market companies. For some mid market transactions, the fee structure may very well be a mixture of upfront fee and success fee and most offers are negotiated. Owner and the M&A specialist can work to make win-win deals collectively.

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