Brokerage success fees on this desk follow the classic Lehman formula — the “5-4-3-2-1” scale. It is a tiered, marginal-rate fee: a higher percentage applies to the first slice of deal value and the rate steps down on each successive slice. It is the market-standard way to charge an intermediation fee that scales with deal size without becoming disproportionate on large transactions.
The scale
- 5% of the first USD 1,000,000 of consideration.
- 4% of the second USD 1,000,000 (USD 1,000,001 – 2,000,000).
- 3% of the third USD 1,000,000 (USD 2,000,001 – 3,000,000).
- 2% of the fourth USD 1,000,000 (USD 3,000,001 – 4,000,000).
- 1% of everything above USD 4,000,000.
The rates are marginal, not cliff-edged. You do not apply a single rate to the whole deal; you apply each rate to its own band and add the bands together. This is exactly how the desk’s fee calculator works, and how the Brokerage Mandate Agreement expresses the fee.
A worked example — a USD 6,000,000 deal
- First USD 1M at 5% = USD 50,000.
- Second USD 1M at 4% = USD 40,000.
- Third USD 1M at 3% = USD 30,000.
- Fourth USD 1M at 2% = USD 20,000.
- Remaining USD 2M at 1% = USD 20,000.
- Total success fee = USD 160,000 — an effective rate of about 2.67% on the USD 6M.
Notice how the effective (blended) rate falls as the deal grows: it is 5% on a USD 1M deal, but only ~2.67% on a USD 6M deal and keeps falling above that. That is the point of the scale — it rewards getting a deal done while keeping the fee sensible at the top end.
What counts as “consideration”?
The fee is charged on the gross transaction value, and the mandate defines that broadly so the base cannot be hollowed out. Consideration includes cash, the assumption or repayment of debt, and deferred or contingent consideration such as earn-outs, plus the value of any non-cash consideration. Deferred and contingent amounts are counted, with the matching slice of fee becoming due as and when that consideration is actually received.
Minimum fees and retainers
On smaller deals a pure Lehman calculation can produce a fee that does not cover the work, so a minimum success fee is common — a floor that applies if the calculated figure comes out lower. A retainer (or work fee) is sometimes charged on signing; where used, it is usually creditable against the eventual success fee but non-refundable if no deal completes. Both are optional fields in the mandate template.
VAT or similar taxes are charged on top of the success fee where applicable. The figures above are illustrative — confirm the exact basis, currency and any minimum in your mandate, and take your own tax advice.
Putting it in the document
When you prepare a Brokerage Mandate Agreement, the 5-4-3-2-1 scale is written into the fee clause automatically, parameterised by the currency you choose, with optional minimum-fee and retainer clauses. Model the number first in the desk’s fee calculator, then lock the basis into the mandate.