DEFINITION of 'Lehman Formula'
A compensation formula developed by Lehman Brothers for investment banking services. The structure is as follows:
-5% of the first million dollars involved in the transaction
-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)
BREAKING DOWN 'Lehman Formula'
Because of inflation, investment bankers often seek some multiple of the original Lehman formula.