<SEC-DOCUMENT>0001345126-22-000050.txt : 20220922
<SEC-HEADER>0001345126-22-000050.hdr.sgml : 20220922
<ACCEPTANCE-DATETIME>20220812161256
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001345126-22-000050
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20220812

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Compass Diversified Holdings
		CENTRAL INDEX KEY:			0001345126
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD FURNITURE [2510]
		IRS NUMBER:				576218917
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		301 RIVERSIDE AVENUE
		CITY:			WESTPORT
		STATE:			CT
		ZIP:			06880
		BUSINESS PHONE:		203-221-1703

	MAIL ADDRESS:	
		STREET 1:		301 RIVERSIDE AVENUE
		CITY:			WESTPORT
		STATE:			CT
		ZIP:			06880

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Compass Diversified Trust
		DATE OF NAME CHANGE:	20051122

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Compass Group Diversified Holdings LLC
		CENTRAL INDEX KEY:			0001345122
		STANDARD INDUSTRIAL CLASSIFICATION:	APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300]
		IRS NUMBER:				203812051
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		301 RIVERSIDE AVENUE
		CITY:			WESTPORT
		STATE:			CT
		ZIP:			06880
		BUSINESS PHONE:		203-221-1703

	MAIL ADDRESS:	
		STREET 1:		301 RIVERSIDE AVENUE
		CITY:			WESTPORT
		STATE:			CT
		ZIP:			06880
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
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<title>Document</title></head><body><div id="i9bf6dd56a124453797414f48bab15137_1"></div><div style="min-height:45pt;width:100%"><div><font><br></font></div></div><div style="text-align:justify"><font><br></font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">COMPASS DIVERSIFIED HOLDINGS</font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">COMPASS GROUP DIVERSIFIED HOLDINGS LLC </font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">301 Riverside Avenue</font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Second Floor </font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Westport, Connecticut 06880 </font></div><div style="text-align:center"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">(203) 221-1703 </font></div><div style="text-align:center"><font><br></font></div><div style="text-align:justify"><font><br></font></div><div style="margin-bottom:24pt;text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">August 12, 2022</font></div><div style="text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">VIA EDGAR SUBMISSION</font></div><div style="text-align:justify"><font><br></font></div><div><font><br></font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Division of Corporation Finance</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Office of Manufacturing </font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">U.S. Securities and Exchange Commission</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">100 F Street, North East</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Washington, D.C. 20549-3561</font></div><div><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Attn&#58; Beverly Singleton, Andrew Blume</font></div><div style="margin-top:12pt;padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Re&#58;</font><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Compass Diversified Holdings</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Form 10-K for the Fiscal Year Ended December 31, 2021</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Filed&#58; February 24, 2022</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">File No&#58; 001-34927</font></div><div style="padding-left:36pt;padding-right:4.5pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Compass Group Diversified Holdings LLC</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Form 10-K for the Fiscal Year Ended December 31, 2021</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">Filed&#58; February 24, 2022</font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%">File No&#58; 001-34926</font></div><div style="padding-left:72pt;padding-right:4.5pt;text-indent:-36pt"><font><br></font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font><br></font></div><div style="padding-left:36pt;padding-right:4.5pt;text-indent:-36pt"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Ladies and Gentleman&#58;</font></div><div style="margin-top:6pt;text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">On behalf of Compass Diversified Holdings (&#8220;Holdings&#8221;) and Compass Group Diversified Holdings LLC (the &#8220;LLC&#8221;) (collectively, the &#34;Company&#34;), set forth below is our response to the letter provided by the Staff of the Division of Corporation Finance (the &#8220;Staff&#8221;) of the Securities and Exchange Commission (the &#8220;Commission&#8221;) dated August 5, 2022 commenting on</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%"> the above-captioned Form 10-K for the Fiscal Year Ended December 31, 2021 filed with the Commission on February 24, 2022 (the &#8220;Form 10-K&#8221;). For your convenience, we have set forth the Staff&#8217;s comments in bold, italic typeface followed by our response. References to &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our&#8221; and &#8220;Registrant&#8221; refer to the Company. All other terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Form 10-K. </font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%;text-decoration:underline">Form 10-K for the Fiscal Year Ended December 31, 2021</font></div><div style="text-align:justify"><font><br></font></div><div style="text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%;text-decoration:underline">Financial Statements</font></div><div style="margin-top:9pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%;text-decoration:underline">Note C - Acquisition of Businesses, page F-18</font></div><div style="margin-top:9pt;padding-left:18pt;text-align:justify;text-indent:-18pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%">1. &#160;&#160;&#160;&#160;We have reviewed your response to comment 2 and have the following comments&#58;</font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify"><font><br></font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify"><font><br></font></div><div style="height:45pt;position:relative;width:100%"><div style="bottom:0;position:absolute;width:100%"><div><font><br></font></div></div></div><hr style="page-break-after:always"><div style="min-height:45pt;width:100%"><div><font><br></font></div></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify"><font><br></font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify;text-indent:-27pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%">&#8226;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%;padding-left:23.15pt">Clarify in further detail how the intercompany loans represent purchase price consideration under ASC 805-30-30-7. In doing so, provide us with a walkthrough of the loan life cycle and pertinent details of all related transactions, including the specific parties that give and receive the loans and the typical timing of loan issuance and repayment. Clarify if the intercompany loans received by the newly created holding company (&#34;Holding Company&#34;) are paid to the selling shareholders or are retained in the acquired business. Consider providing an illustrative example to facilitate our understanding. </font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify;text-indent:36pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">A component of our acquisition financing strategy that we utilize in acquiring the businesses we own and manage is to provide both equity capital and debt capital, raised at Holdings and LLC. For each acquisition, we structure the transaction so that a newly created holding company (&#34;Holding Company&#34;) acquires 100% of the equity interests in the acquired business. Holding Company is initially capitalized through an equity investment and debt financing provided by the LLC. Holding Company uses the cash provided by the LLC and the amounts received from any noncontrolling interest holders to fund the acquisition. The entirety of the purchase consideration, including the portion of the purchase consideration funded by debt capital provided by Holdings and LLC to the Holding Company, is paid by the Holding Company to the selling security holders. Said differently, proceeds of the initial intercompany loans are not retained by the borrowing entities but directly flow through to selling security holders to fund a portion of the purchase price, similar to a scenario in which Holding Company were to receive third-party financing to fund the purchase consideration. The debt portion of the financing provided by the LLC to initially capitalize Holding Company is in the form of &#8220;intercompany loans&#8221; to the Holding Company and the acquired business (as co-borrowers) and are payable to the LLC by the Holding Company and acquired business. The selling security holders who have received purchase consideration, funded in part by the intercompany loans, are not obligated to repay the intercompany loans. The intercompany loans are provided pursuant to a credit agreement between LLC and Holding Company and the acquired business, and typically consist of a revolving loan commitment, a senior secured term loan and a senior subordinated secured term loan. Each intercompany loan has a scheduled maturity (which is typically 5-6 years) and each business is entitled to repay all or a portion of the principal amount of the outstanding loans, without penalty, prior to maturity. If the acquired company is later divested by the Company, the intercompany loan will be repaid to the LLC out of sales proceeds (identical to the treatment of third-party debt). The intercompany loan agreements contain customary affirmative and restrictive covenants, market rate interest rates, and are collateralized by the assets of the acquired business.  Our strategy of providing intercompany debt financing within the capital structure of the businesses that we acquire and manage allows us to distribute cash to the LLC through monthly interest payments and amortization of the principle of these intercompany loans. These intercompany loans and the cash flows associated with them eliminate in the Company's consolidation and are not included in the balances of our consolidated balance sheet or the consolidated statement of cash flows. </font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify;text-indent:-27pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%">&#8226;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-style:italic;font-weight:700;line-height:120%;padding-left:23.15pt">Revise your disclosures in future filings to clearly explain the Holding Company structure you use to conduct less than wholly-owned business combinations. In addition to any clarifying disclosures stemming from the preceding bullet, ensure that you disclose that the acquisition line item within investing activities on your statements of cash flows includes amounts received from and paid on behalf of non-controlling interest holders. Also tell us and consider disclosing if the selling shareholders that continue as non-controlling interest holders exit the predecessor entity and buy into the new Holding Company at the same price or a different price. </font></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify;text-indent:36pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">We will revise our disclosures in future filings to explain the Holding Company structure that we use to conduct business combinations, including disclosures clarifying that the total purchase consideration is consideration paid to the selling shareholders, and that the purchase price may include amounts invested by the selling shareholders who will use a portion of the purchase consideration received for selling their shares in the acquired business to invest in the transaction alongside the Company. As we previously noted, because they are investing in the transaction alongside the Company</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:700;line-height:120%"> </font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">at the same price per share as the Company and are not retaining their existing equity in the acquired business, we include the amount </font></div><div style="height:45pt;position:relative;width:100%"><div style="bottom:0;position:absolute;width:100%"><div style="text-align:center"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:9pt;font-weight:400;line-height:120%">2</font></div></div></div><hr style="page-break-after:always"><div style="min-height:45pt;width:100%"><div><font><br></font></div></div><div style="margin-top:9pt;padding-left:36pt;text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">provided by noncontrolling shareholders in the total purchase consideration. For each of our material acquisitions that includes reinvestment from the selling security holders, we include the following disclosure as it relates to the Holding Company in which the minority holder invests&#58; &#34;The fair value of the noncontrolling interest was determined based on the enterprise value of the acquired entity multiplied by the ratio of the number of shares acquired by the minority holders to total shares.&#34; We will provide additional disclosure indicating that the selling shareholders who invest in the transaction alongside the Company are investing in the new Holding Company that is the acquiree in the acquisition. We will include in our revised disclosure that the amount in the line item &#34;Acquisition, net of cash acquired&#34; in the investing section of our consolidated cash flow represents the total amount of cash consideration paid for the acquired business, including amounts received from and paid on behalf of non-controlling interest holders.</font></div><div style="margin-top:12pt;text-align:justify"><font style="background-color:#ffffff;color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Please contact me at (203) 221-1703 and ryan&#64;compassdiversified.com with any questions or further comments regarding our responses to the Staff's comments.</font></div><div><font><br></font></div><div><font><br></font></div><div style="padding-left:252pt;text-align:justify"><font><br></font></div><div style="padding-left:252pt;text-align:justify"><font><br></font></div><div style="padding-left:252pt;text-align:justify"><font><br></font></div><div style="padding-left:252pt;text-align:justify"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Sincerely,</font></div><div style="padding-left:252pt;text-align:justify"><font><br></font></div><div style="padding-left:252pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%;text-decoration:underline">&#47;s&#47; Ryan J. Faulkingham</font></div><div style="padding-left:252pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;Ryan J. Faulkingham </font></div><div style="padding-left:252pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;Chief Financial Officer</font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div style="text-align:center"><font><br></font></div><div><font><br></font></div><div style="padding-left:36pt;text-indent:-36pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">cc&#58;</font><font style="color:#000000;font-family:'Arial',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;</font><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">Ms. Kerri Tiernan, Compass Group Diversified Holdings LLC</font></div><div style="padding-left:36pt;text-indent:-36pt"><font style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:11pt;font-weight:400;line-height:120%">&#160;&#160;&#160;&#160;Mr. Evan A. Toebbe, Squire Patton Boggs (US) LLP </font></div><div style="height:45pt;position:relative;width:100%"><div style="bottom:0;position:absolute;width:100%"><div style="text-align:center"><font style="color:#000000;font-family:'Arial',sans-serif;font-size:9pt;font-weight:400;line-height:120%">3</font></div></div></div></body></html>
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