What is Double Lehman Scale?
The Short Answer
Double Lehman Scale explained simply
The Double Lehman Scale is a compensation model for M&A brokers. It takes the percentages from the standard Lehman Scale and doubles them. This means the broker earns a larger commission as the transaction value goes up. It is often used for smaller deals or those that require more effort from the broker.
Real-World Example
Double Lehman Scale in Action
Let's say a business sells for $2 million. \n\nUnder a standard Lehman Scale, the commission might be:\n 5% on the first $1 million = $50,000\n 4% on the next $1 million = $40,000\n Total = $90,000\n\nUnder a Double Lehman Scale, the percentages are doubled:\n 10% on the first $1 million = $100,000\n 8% on the next $1 million = $80,000\n Total = $180,000\n\nAs you can see, the broker's fee is significantly higher with the Double Lehman Scale.
Why this matters
Understanding the Double Lehman Scale is important because it directly impacts the net proceeds you receive from selling your business. If your broker uses this scale, you will pay a higher percentage in fees compared to the standard Lehman Scale. This is especially true for smaller deals, where the doubled percentages can take a larger bite out of the sale price.
Always clarify the commission structure with your M&A broker upfront. Make sure you understand how their fees are calculated and how they compare to other options. This helps you avoid surprises and ensures you get the best deal.
Always clarify the commission structure with your M&A broker upfront. Make sure you understand how their fees are calculated and how they compare to other options. This helps you avoid surprises and ensures you get the best deal.
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