Those multiples rise to 6 to 9 times EBITDA for firms with between $500 million and $2 billion in AUM. And Slater added that for the largest RIAs with over $2 billion, an acquirer might pay 10 or 12 times cash flow.
But other factors are critical. A firm with a younger client base will command a higher multiple than another with 30 or 40 percent of its clients over the age of 70. To buyers, those firms look like a depleting oil well.
Modern technology is also critical. Buyers don't want to buy a firm with outdated technology that will require major investments, Salter noted. At the very least, that will be factored into the acquisition price.