Compass Diversified cuts management fees, expects $19M-$22M savings

Compass Diversified (NYSE: CODI) has amended its management services agreement with its external manager, Compass Group Management LLC, reducing the base management fee rate and restructuring incentive compensation, according to a press release issued July 13, 2026.

The Ninth Amended and Restated Management Services Agreement takes effect immediately, with revised fee provisions beginning January 1, 2027. The base management fee will decline from 2.00% to 1.25% of Adjusted Net Assets on the first $3 billion, 1.125% on the next $2 billion, and 1.00% on amounts above $5 billion. Base management fees for 2027 are capped at $30 million.

Based on current estimates, total 2027 management fees are expected to decline by approximately $19 million to $22 million compared to what the existing formula would have produced, depending on the company's Adjusted Net Assets for 2027 and the level of payout under a new Performance-Based Award.

The amended agreement replaces the existing incentive fee with two new awards. A Share Alignment Award, equal to 0.125% of average Adjusted Net Assets, is settled in cash and intended to support CODI share ownership by senior manager personnel. A Performance-Based Award carries the same target grant value and is weighted 70% to relative total shareholder return and 30% to EBITDA performance. The total shareholder return component pays nothing if CODI's total shareholder return is negative and, for 2027, pays nothing unless CODI's share price plus distributions reaches at least $17.25 by year-end.

The amended agreement also includes clawback and recoupment provisions and Compensation Committee authority over performance objectives and payouts.

CODI and the manager stated they intend to seek shareholder approval at the 2027 annual meeting for an equity-based incentive structure that, if approved, would replace the cash-based awards beginning in 2028.

The company reaffirmed its previously issued full-year 2026 outlook, stating its subsidiaries continue to perform well.

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