Compass Diversified (CODI) has entered into the Ninth Amended and Restated Management Services Agreement, which revises its management fee and incentive compensation structure with its external manager, Compass Group Management LLC. The new terms, which become effective January 1, 2027, are designed to reduce management costs and increase alignment with shareholder returns through a more performance-based framework.
Key Details
- New Management Fee Structure (Effective 2027): The annual base management fee will be revised to a tiered structure: 1.25% on the first $3.0B of Adjusted Net Assets (ANA), 1.125% on ANA between $3.0B and $5.0B, and 1.0% on ANA above $5.0B. The 2027 base management fee is capped at $30.0 million.
- Revised Incentive Compensation: The existing incentive fee is replaced with two new components: a 0.125% annual Share Alignment Award and a 0.125% target annual Performance-Based Award. For 2027, both will be cash-settled.
- Performance-Based Award Metrics: The Performance-Based Award is tied 70% to CODI’s total shareholder return relative to the S&P SmallCap 600 Index (with a negative absolute TSR restriction and a $17.25 dividend-adjusted stock price threshold for 2027) and 30% to company-level adjusted EBITDA objectives.
- Future Structure & Governance: The company intends to seek shareholder approval for an equity-based incentive structure for fiscal years after 2027. The agreement also adds a Dodd-Frank clawback policy provision and requires the manager to maintain share ownership guidelines for senior personnel.