Vincent Kompany has been confirmed as the new head coach of Bayern Munich.

The 38-year-old has signed three-year contract through to 2027.

The Athletic reported last week that the Belgian was close to being appointed by the Bundesliga club, with a €12 million (£10.2 million) compensation package agreed between the clubs for Kompany, whose deal with Burnley was set run through to 2028.

Kompany said: “I’m looking forward to the challenge of FC Bayern. It’s a great honour to be able to work for this club; FC Bayern is an institution in international football.

“As a coach, you have to stand for who you are as a person: I love having the ball, being creative – and we also have to be aggressive on the pitch and courageous. I’m now looking forward to the most elementary things: working with the players, building a team. When the foundation is in place, success will follow.”

“He is a young, very ambitious coach who brings a lot of international experience, has his finger on the pulse of the players and knows exactly what should happen on the pitch. He can and will give our team an enormous amount.”

Kompany guided Burnley to promotion to the Premier League during his debut season in charge as they topped the Championship with 101 points. However, the club were relegated from the top flight the following campaign after taking just 24 points from their 38 games.

Burnley said in a statement: “We understand the allure and prestige of a club like Bayern Munich and respect Vincent’s ambition to explore new opportunities. We wish only the best for Vincent and would like to put on record our appreciation for his dedication every single day he was a part of this football club.”

The Turf Moor club also confirmed they have “started the search for a new manager and will make an announcement in due course”.

The former Manchester City captain previously had a two-year spell in charge at Anderlecht, the club he began and finished his playing career with.

It was announced in February that Bayern head coach Thomas Tuchel would step down at the end of the season having been appointed in March last year on a contract through to 2025.

Xabi Alonso was considered a potential candidate before he opted to stay at Bayer Leverkusen while Julian Nagelsmann, sacked by Bayern in February of last year, extended his contract as head coach of the German national team after being linked with a return.

Austria boss Ralf Rangnick, former head coach Hansi Flick and Crystal Palace manager Oliver Glasner were also sounded out with Tuchel also not persuaded to reverse his decision to leave.

There is no question that Bayern Munich are taking a leap of faith with Kompany. A 38-year-old head coach who has never worked at a major club anywhere, let alone one of Bayern’s size and scale; clearly it’s a risk.

But ultimately, this is about style. Bayern believe that Kompany’s football, which draws so heavily from Pep Guardiola, for whom he played at Manchester City, matches how they want to play and suits the squad they currently have.

That Kompany speaks excellent German helps, too. That was not a decisive factor, but it was still important. Bayern want a head coach who can communicate well with the players, of course, but they want someone who can assimilate into the club rather than create an island within it.

Kompany’s departure is a significant loss for Burnley because he had become the central figure at the club and had built it in his image from the playing philosophy to having the final say on signings.

Owners ALK Capital have always retained their faith in the Belgian but allowing a manager to have so much control can lead to consequences when he departs because his fingerprints are all over the club. A number of players signed for Burnley because of Kompany, so they may rethink their futures.

After suffering a disappointing relegation after a very poor Premier League campaign, Kompany was viewed as the perfect man to facilitate a quick return after the dominant 101-point Championship title win in his first season.

Towards the end of the campaign, signs suggested he would not going anywhere but Bayern is an offer impossible to turn down and Burnley will now have to find inspiration from elsewhere.

• The Athletic report