The Lehman Formula, also known as the Lehman Scale, is a formula to define the compensation a bank or finder should receive when arranging for and handling a large underwriting or stock brokerage transfer transaction for a client.
[1] The Lehman formula was originally used by investment banks and individual or corporate "finders" for the raising of capital for a business, either in public offerings or private placements, payable by the vendor(s) of the business once the funds have cleared.
Today, the original formula remains in use in limited situations with so-called "finders" - individuals (or firms), who introduce relationships but otherwise do not have any execution, distribution, legal, analytic, or administrative role in the execution of a deal.
The formula was first developed in the early 1970s by the Lehman Brothers, for underwriting and capital raising services.
[3] The TVA basically applies the percentage fee that fits the highest dollar value.
A five million dollar deal was more significant when the formula was designed in the 1960s, but today it is considered small by most large banks.
In addition, the percentage is held constant at 3% above $8 million: This resulted in an approximately 3x adjustment to the original formula, vs 6x for inflation.