Blog · Published 2026-11-05
The Lehman formula explained with current numbers.
Short answer
The Lehman formula is a success fee that pays the adviser a lower percentage as the deal gets bigger. In its classic version the fee is 5% of the first $1 million, 4% of the second million, and so on, with 1% on everything above $5 million. "Double Lehman" starts at 10% and falls to 2%. In the Firmex M&A Fee Guide 2024/25 it is the most common success fee structure: 40% of firms in Europe, 41% globally, 45% in the DACH region.
The classic formula
A success fee is paid when a sale completes and is tied to its value. The Lehman formula splits the price into bands and applies a falling rate to each band. The Firmex reports describe the classic version as 5% on the first $1 million, 4% on the second million, and so on, with a 1% rate on all amounts over $5 million.
Source for every figure on this page: Firmex M&A Fee Guide 2024/25 (Europe, Global and DACH reports, published with DEALCIRCLE; the publisher is Firmex). Amounts are in US dollars as the reports give them. The reports summarize an adviser survey (456 responses worldwide, 289 from Europe, 202 from the DACH region, collected in December 2024 and January 2025). They describe what advisers say they charge, not a quote for your deal.
Double Lehman and other variations
Many advisers say they use "Double Lehman", where the rates start at 10% and fall to 2%. The reports do not publish the steps in between, so we do not calculate a double Lehman example; ask the adviser for the schedule in writing.
The reverse is an accelerator (or reverse Lehman): the rate increases once the price passes a set amount, which some advisers say reflects the value they add. The simplest version is a flat percentage whatever the price. There are many variations, and some advisers add a minimum success fee.
Which formula do advisers use?
The accelerator is described in all three reports as becoming more popular.
| Success fee structure (2024) | Europe | Global | DACH |
|---|---|---|---|
| Lehman: rate falls as the deal grows | 40% | 41% | 45% |
| Flat percentage | 26% | 27% | 21% |
| Accelerator: rate rises as the deal grows | 22% (from 16%) | 21% (from 16%) | 26% (from 20%) |
| Firms mainly serving buyers that charge no success fee | 29% | 20% | 24% |
The most common success fee by deal size
The reports asked advisers to estimate their effective success fee for deals of different sizes. The answers, whatever the formula:
| Deal size | Europe | Global | DACH |
|---|---|---|---|
| $5 million | 4.3% | 4.8% | 4.5% |
| $10 million | 3.6% | 4.0% | 3.7% |
| $20 million | 3.0% | 3.4% | 3.1% |
| $50 million | 2.3% | 2.7% | 2.3% |
| $100 million | 1.7% | 2.0% | 1.8% |
| $150 million | 1.6% | 1.9% | 1.6% |
Notes on the numbers
- The $5 million, $20 million, $100 million and $150 million rows are stated in the reports' text. The $10 million and $50 million rows are the labels printed on the reports' charts.
- All three reports note that the formula had very little effect on the average effective fee at any deal size. The structure changes how the fee is built; at a given deal size the typical result is similar.
- The falling rates are visible in the table: the fee as a percentage drops as the deal grows. In 2024 the fee was lower than in 2023 at nearly every deal size in Europe and the DACH region, most for smaller deals.
- The reports start at $5 million. They state no effective rate for smaller deals.
A worked illustration (plain arithmetic, not a quote)
This is arithmetic on the published description, to show how a falling rate works. It is not a figure from the reports and not what any adviser would charge you.
- The steps for the third and fourth million follow the pattern in "5% for the first $1 million, 4% for the second million, and so on". Check your own schedule.
- The reports' most common effective rate for a $5 million deal is higher than 3.0% (4.3% in Europe: 4.3% of $5,000,000 is $215,000 as plain arithmetic). The reports do not explain the gap. Minimum success fees, which most European and DACH advisers include, are one thing to ask about, because a minimum raises the effective percentage on a small price.
- So the published effective rates, not the classic schedule, are the better benchmark for a deal of this size.
| Band of the price | Rate in the classic description | Fee on that band |
|---|---|---|
| First $1 million | 5% | $50,000 |
| Second $1 million | 4% | $40,000 |
| Third $1 million | 3% (the description's next step) | $30,000 |
| Fourth $1 million | 2% (the description's next step) | $20,000 |
| Fifth $1 million | 1% (the description's next step) | $10,000 |
| Total on a $5 million price | $150,000, which is 3.0% of $5 million | |
| Each further $1 million above $5 million | 1% | $10,000 |
What a buyer should take from this
- The formula is agreed between the seller and its adviser. You do not choose it, but it tells you how the adviser is paid: mainly when a deal completes, on its value.
- A falling rate means the adviser's reward for a higher price shrinks as the price rises. Advisers using an accelerator say they want the opposite incentive. Neither changes what you owe.
- When the seller is paid over time (an earnout or seller financing), ask whether the adviser's fee follows the same timing. 51% of European advisers want the full fee at closing regardless; see what the adviser charges the seller.
- For the whole fee picture, including work fees and expenses, see what M&A advisers charge in 2024/25.
Where Deal OS fits
Deal OS does not set, negotiate or advise on adviser fees. What it does is the buyer's side of the work: it reads a CIM (Confidential Information Memorandum) and the data room, reports where the documents disagree, and cites the page for every finding. You can run your first CIM check free with the CIM Pass, or see a finished brief in the sandbox.
Questions
Frequently asked questions.
What is the Lehman formula?
A success fee formula where the percentage falls as the deal size rises. In its classic version it is 5% of the first $1 million, 4% of the second million, and so on, with 1% on all amounts over $5 million.
What is double Lehman?
A version where the rates start at 10% and fall to 2%. The Firmex reports do not publish the steps in between, so ask the adviser for the schedule in writing.
How many advisers use the Lehman formula?
It is the most common success fee structure in the Firmex M&A Fee Guide 2024/25: 40% of firms in Europe, 41% globally and 45% in the DACH region.
Does the formula change what the seller pays?
Less than you might expect. All three reports found that Lehman, accelerator and flat formulas had very little effect on the average effective fee at a given deal size, for example around 4.3% to 4.8% for a $5 million deal depending on the region.
Keep reading
- Buyer deal-readiness one-pager (free, built in your browser) (the full guide)
- What M&A advisers charge in 2024/25: fees for small and mid-sized deals
- Buying a business: what the adviser charges the seller and what it means for you as the buyer
- Getting on an M&A adviser's shortlist: a buyer's checklist
- Short answers to buyers' questions
