**Lehman formula, **

### Definition of Lehman formula:

As a provider of global investment banking services, Lehman Brothers needed a way to clearly convey to its potential clients the fees they would charge for their services. The advantage of the Lehman formula is that it's easy to understand and easy for the client to quickly get a ballpark estimate on how much their transaction might cost them in fees. It's not uncommon for large investment banking firms to assist clients with transactions worth hundreds of millions or billions of dollars. The Lehman formula structures the investment banking fee on a percentage of the transaction amount with a set of tiered fees.

Investment bankers compensation formula developed by the securities trading firm Lehman Brothers. In its original form, it computes the fee or brokerage as follows: (1) 5 percent of the first million dollars of the sum involved in a transaction, (2) 4 percent of the second million, (3) 3 percent of the third million, (4) 2 percent of the fourth million, and (5) 1 percent of everything thereafter. In inflationary times, however, investment bankers often demand a multiple of these percentages.

The Lehman formula is a compensation formula developed by Lehman Brothers to determine the commission on investment banking or other business brokering services. Lehman Brothers developed the Lehman Formula, also known as the Lehman Scale Formula, in the 1960s while raising capital for corporate clients.

### How to use Lehman formula in a sentence?

- For their services, an investment bank can charge flat fees for each transaction, earn commissions based on the dollar amount of the transaction, or a combination of both.
- Large investment banks work with corporations to raise capital, often through an initial public offering (IPO), a merger or acquisition, or through a spinoff.
- Lehman Brothers developed the Lehman formula to determine the commission an investment bank should receive for arranging client transactions. .
- The Lehman formula structures the investment banking fee on a percentage of the transaction amount based on a set of tiered fees.

Meaning of Lehman formula & Lehman formula Definition