Entering Investment Banking | Learn the Skills & Get the Job

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Summary

• First, let me give you 2 facts.

• Fact 1, the most common fee scale of an investment bank on a merger deal is based on Lehman 5-4-3-2-1 formula, this means 5% is paid on the first million dollars of the sale price, 4% on the next million, 3% on the third million, 2% on the fourth million, and 1% on the amount over $4 million dollars.

• For large transactions, the fees are less than 1% of the deal’s value, still a tremendous amount of money.

• The 2nd fact is that taking a company public can also be very expensive.

• Costs vary, but can be as much as 10% on a $150 million stock issue, not including internal expenses, such as management’s time.