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Lehman Fee Calculator

Being in the Private Equity and investment banking world you run across the Lehman Formula in paying advisor/broker/banker fees quite often. Most all of us know the structure of 5%, 4%, 3%, 2%, and 1% for the first 5 million respectively, but sometimes it is just easier to have a calculator that does it for you. I couldn’t easily find any online and had some time to kill one evening, so I made one (includes option for Double Lehman):

Unfortunately, WordPress doesn’t let you embed Javascript (Myspace can tell you why :)), so either click the above image or go to:

The other ways to remember the calculation / keep it simple in your head are:

$150k for first $5m TEV + 1% of the balance; OR

$200k for the first $10m TEV + 1% of the balance

In the future I could add flat % (i.e.1% & 2%) as well as Reverse Lehman options to this calculator if enough people would find it helpful – please let me know in the comment section below.

Dan – Love the calculator. Thanks for sharing. I think it would be helpful to have another option of just putting in the sale price. For example, I have a current deal that is $2.5M paid out on Lehman scale. I know the sale price (2.5M) but off the top of my head, I don’t recall the ebitda and exact multiple that the buyer is using without looking it up. Would be easier to just enter sale price. Thanks.

Sizzle – that definitely makes a lot of sense. Let me work on that and see if I can add. I know it is not a perfect solution, but for the time being you could put $2.5m as the EBITDA and 1x as the multiple to get to the $2.5m TEV / sales price. Thanks again for your feedback!

Hi Bruce, yes this is the typical formula applied to a finders fee in M&A for someone referring a business to a buyer for acquisition or investment. Hope that helps 🙂

There is a project where there will be no commission for a sale, but the structure, partners, developers, concepts, architects, contractors, suppliers and more where put together by us. Are you aware of REALTORS using this formula for facilitation fees?

Yes most – not all CRE acquistion/deposition transactions are structured the same way using Lehman, reverse Lehman as well as modified Lehman. Use the right Lehman depending on the size, length, cost OOP to close, difficulty of project hurdling obsticles, so many variables etc. of the transaction and you won’t have disappointed B/S. Of course by Law, everything in real estate is negotiable. (Most B/S will negotiate a modifed Lehman). It has been around since the early 1970s I was told when I joined my firm in 1983.

Is there a double lehman formula that I can simply embed in my excel worksheet? Our licensees have to calculate both the project fee for a business sales, as well as then re applying a lehman formula to calculate their portion of the fee. All of the examples I have found are complex. I am looking for a formula that I can copy and paste into a cell. Thanks

Double-check me on this, but I believe this will get you what you need. This is an array formula for Excel, so you will have to hit "Ctrl"+"Shift"+"Enter" for it to work. This also assumes the cell you are calculating from is in single-digit millions. So "1" for 1,000,000 (you can obviously edit the formula by multiplying or dividing as necessary to get to values you need). This formula will also only work up to 1 trillion (1 million * 1 million) as written.

Honestly the answer is whatever he’ll agree to. Per the formula it would be 5% of $40k, or $2k, but again it is whatever you negotiate, which might be tough post facto (if that is the case here).

Thanks Dan. ERP insightful. Would be interested in the double percentage values within the calculator.

Dan – Love the calculator. Thanks for sharing. I think it would be helpful to have another option of just putting in the sale price. For example, I have a current deal that is $2.5M paid out on Lehman scale. I know the sale price (2.5M) but off the top of my head, I don’t recall the ebitda and exact multiple that the buyer is using without looking it up. Would be easier to just enter sale price. Thanks.

Sizzle – that definitely makes a lot of sense. Let me work on that and see if I can add. I know it is not a perfect solution, but for the time being you could put $2.5m as the EBITDA and 1x as the multiple to get to the $2.5m TEV / sales price. Thanks again for your feedback!

Handy, Dan…Thanks

Absolutely – glad you found it helpful 🙂

Hi Dan,

Does this formula apply to “finders fee” for simplifying referring a deal?

Hi Bruce, yes this is the typical formula applied to a finders fee in M&A for someone referring a business to a buyer for acquisition or investment. Hope that helps 🙂

– Dan

There is a project where there will be no commission for a sale, but the structure, partners, developers, concepts, architects, contractors, suppliers and more where put together by us. Are you aware of REALTORS using this formula for facilitation fees?

Unfortunately I am not familiar with that.

Yes most – not all CRE acquistion/deposition transactions are structured the same way using Lehman, reverse Lehman as well as modified Lehman. Use the right Lehman depending on the size, length, cost OOP to close, difficulty of project hurdling obsticles, so many variables etc. of the transaction and you won’t have disappointed B/S. Of course by Law, everything in real estate is negotiable. (Most B/S will negotiate a modifed Lehman). It has been around since the early 1970s I was told when I joined my firm in 1983.

Is there a double lehman formula that I can simply embed in my excel worksheet? Our licensees have to calculate both the project fee for a business sales, as well as then re applying a lehman formula to calculate their portion of the fee. All of the examples I have found are complex. I am looking for a formula that I can copy and paste into a cell. Thanks

Here you are:

{=SUM((A1>{0,1,2,3,4,5})*(A1{0,1,2,3,4,5})*(A1{0,1,2,3,4,5})*(A1<={1,2,3,4,5,1000000})*{0,1,2,3,4,5}))}

Double-check me on this, but I believe this will get you what you need. This is an array formula for Excel, so you will have to hit "Ctrl"+"Shift"+"Enter" for it to work. This also assumes the cell you are calculating from is in single-digit millions. So "1" for 1,000,000 (you can obviously edit the formula by multiplying or dividing as necessary to get to values you need). This formula will also only work up to 1 trillion (1 million * 1 million) as written.

Hope that helps!

-Dan

Sorry, for some reason WordPress doesn’t like all those formula characters (it deleted some). I dropped it in a Google Drive doc for you:

https://docs.google.com/spreadsheets/d/1NgHykzgUTE5NfQcX5AowKwJNqhKazQNBiufmBbKAmiU/edit?usp=sharing

I made a guy $40,000. What should my finders fee be?

Honestly the answer is whatever he’ll agree to. Per the formula it would be 5% of $40k, or $2k, but again it is whatever you negotiate, which might be tough post facto (if that is the case here).