Considering selling all or part of your book? Buyers don’t seem to have a preference for a business model—whether you are an investment manager, say, or a financial planner; what they do care about are present and future revenue streams. In short: Fees rule.

Yes, you’ve heard that before. But it’s so true.

M&A activity is still surprisingly robust these days. Between 2005 and 2007, there were a record number of deals—80 in fact, with the average firm managing $1.5 billion of client assets, according to research from Schwab Institutional. “The first quarter of this year was slow, but year to date [mid-June] there have been 28 deals, so it’s still nearly the same rate [as last year],” says David Devoe, strategic director of M&A at Schwab Institutional. In 2007, the buying frenzy was fueled by holding companies such as Focus Financial, Boston Private, Sanders Morris Harris and others. This year, says Devoe, the M&A market has been dominated by individual RIAs buying other RIAs.

RIA acquisitions in the past eight years show that the majority of deals that involved an external buyer were for firms with more than $500 million in AUM, according to data compiled by Moss Adams and Pershing in its “Real Deals, 2008” report. In fact, in 2007, the median AUM of all firms that sold was $900 million. However, opportunities for firms in the $100 million to $500 million range are expected to increase as the numbers of larger RIAs thin out.

Valuations are where it gets tricky—not only is the revenue, revenue type and AUM important, but so are factors like client-base profile, whether the business has standardized processes and procedures, whether value is delivered by one key advisor or a team, as well as compensation and ownership structure.

Keeping that in mind, here are two ballpark ranges for two types of businesses. Larger practices can go for much higher multiples.

Valuation Rules Of Thumb

The one-man shop, fee and commission mix with AUM $100 million and up: Valuation ranges from 1.8 to 2.6 times revenues.

Fee-only teams with AUMs of $500 million and up can fetch between 2.75 to 3.5 times revenues.

_________________ This article was adapted from a forthcoming feature in Registered Rep.’s September issue, to be posted after Labor Day.