Lehman Fee StructureBy Scott Dickes
We recently got an email from a business broker asking us what type of finders fee structure we typically use. Our standard finder's fee structure is based on the Lehman structure. Since that post has gotten a nice response from the business broker community we thought it might be helpful to walk through a detailed example of how the Lehman structure works. For this example let's assume we have a finder's fee agreement with a Lehman structure with a business broker, and we end up buying a business that they introduced to us for $10 million. This is is how the agreement would pay out:
$1 million x 5% = $50,000
$1 million x 4% = $40,000
$1 million x 3% = $30,000
$1 million x 2% = $20,000
$6 million x 1% = $60,000
The total fee for this transaction would be $200,000 (or 2% of the sale price) and it would be payable at closing.This fee structure was created in the early 1970's by Lehman Brothers and it is a very common fee structure for small business acquisitions. We have used this structure with many of our existing portfolio companies. If you are a business broker and you have a business that meets our criteria, please contact us.
Scott Dickes - General Partner
Scott founded Hadley Capital in 1998 with the objective of bringing a professional investment strategy to the small company market. Scott has spent the better part of two decades financing and growing small companies. It’s in his blood … he grew up visiting small companies on family vacations with his dad who was also a small company investor.
Scott works with Gillinder Glass, S&S, Custom Label, Harris Seeds, ISS, and W.C. Rouse, and was previously the chairman of the board of Packaging Specialists, JRI Industries and Kelatron, all former Hadley Capital companies.
He enjoys traveling with his family, flying (instrument rated pilot), rock climbing, golf, paddle tennis, and water skiing. Scott recently took up beekeeping as a hobby.
Scott is a Trustee of the Hadley School for the Blind (no affiliation). He holds a BA from Duke University and received his MBA from the Kellogg School of Management at Northwestern University. Scott and his wife have two teenage children.