SCHEDULE: Construction Partners: Key Insiders Form Voting Bloc

A Schedule 13D amendment reveals key executives and a major investor have formed a voting group, consolidating significant control over Construction Partners, Inc.

Summary

• This is Amendment No. 3 to Schedule 13D for Construction Partners, Inc., filed by Ned N. Fleming, IV, Barrett N. Bruce, Charles E. Owens, and Fred J. Smith, III (collectively, the "Reporting Persons").
• The amendment removes the Ned N. Fleming, IV 2013 Trust from the Schedule 13D and adds Barrett N. Bruce, Charles E. Owens, and Fred J. Smith, III as additional reporting persons.
• The Reporting Persons, along with SunTx Capital Management Corp. and SunTx Capital II Management Corp., entered into an Amended and Restated Voting Agreement on August 6, 2025.
• Under this agreement, the Reporting Persons commit to voting their Class A and Class B Common Stock in favor of SunTx's recommended candidates for the Issuer's Board of Directors.
• As of August 4, 2025, the group (Reporting Persons and SunTx affiliates) beneficially owns 8,424,724 shares of Class A Common Stock, representing 15.1% of the outstanding Class A shares.
• This group's holdings represent 61.4% of the Issuer's total voting power, primarily because Class B Common Stock carries ten votes per share compared to one vote per Class A share.
• The filing details various equity awards granted to Ned N. Fleming, IV, Barrett N. Bruce, and Fred J. Smith, III, including restricted stock and performance stock units (PSUs).
• PSUs for Ned N. Fleming, IV and Fred J. Smith, III are performance-based, with 50% tied to compound aggregate revenue growth rate and 50% to average Adjusted EBITDA margin, subject to a +/15% adjustment based on Total Shareholder Return (TSR) relative to the Russell 2000.
• No PSUs granted under the recent LTIP-B agreements have vested as of the filing date.

Sentiment

Score: 6

Explanation: The filing indicates a consolidation of voting power and alignment of management incentives through performance-based equity, which can be viewed positively for governance stability. However, the high concentration of voting power (61.4%) in a single group could be seen as a negative for broader shareholder influence.

Positives

• The formation of a consolidated voting group among key insiders and a major investor (SunTx) may provide enhanced governance stability and strategic alignment for the company.
• Performance-based equity awards for key executives (Ned N. Fleming, IV and Fred J. Smith, III) align management incentives directly with the company's financial performance (revenue growth, Adjusted EBITDA margin) and shareholder returns (TSR).

Negatives

• The concentration of 61.4% of total voting power within a single group could potentially limit the influence of other shareholders on Board elections and major corporate decisions.

Future Outlook

Performance Stock Units (PSUs) for key executives are tied to future company performance metrics, specifically compound aggregate revenue growth rate and average Adjusted EBITDA margin over three-year periods ending September 30, 2026, and September 30, 2027. Final PSU vesting can be adjusted based on the Issuer's Total Shareholder Return (TSR) compared to the Russell 2000.

Industry Context

This filing highlights a common practice in companies with dual-class share structures, where a smaller percentage of outstanding shares can control a significant portion of voting power. The formation of a formal voting group among key executives and a major investor (SunTx) is a strategic move to consolidate control and potentially streamline governance decisions within the construction and infrastructure sector, where long-term strategic alignment can be crucial.

Comparison to Industry Standards

• The dual-class share structure, granting Class B shares 10 votes per share compared to Class A's one vote, is a governance model seen in various industries, often used to maintain founder or early investor control. Companies like Google (Alphabet), Meta (Facebook), and Berkshire Hathaway utilize similar structures.
• While the filing does not provide specific financial results for direct comparison, the establishment of a formal voting agreement among key insiders and a significant institutional investor (SunTx) is a common mechanism to ensure strategic alignment and control, particularly in industries requiring long-term capital deployment and operational stability like construction.
• This structure allows for stability in leadership and strategic direction, which can be beneficial for long-term projects typical in the construction industry, but it also concentrates voting power, potentially limiting the influence of public shareholders.

Corporate Governance

Related Party Transactions

• Entities affiliated with SunTx distributed Class B Common Stock to Barrett N. Bruce for no consideration on multiple dates (December 7, 2022, June 22, 2023, September 29, 2023, December 6, 2024).
• Grace Ltd. (a limited partnership for which Charles E. Owens serves as general partner) distributed 1,250,048 shares of Class B Common Stock to certain limited partners, including trusts for which Mr. Owens serves as sole trustee, for no consideration on May 8, 2020.
• Tar Frog Investment Management, LLC (for which Ned N. Fleming, IV and Fred J. Smith, III serve as co-managers) acquired 9,333 shares of Class A Common Stock and 5,990 shares of Class B Common Stock for approximately $1.1 million on April 14, 2025.
• Fred J. Smith, III exchanged 28,343 shares of Class A Common Stock for 28,343 newly issued shares of Class B Common Stock for no consideration on May 22, 2024.
• Fred J. Smith, III exchanged 43,104 shares of Class A Common Stock for an equal number of shares of Class B Common Stock for no consideration on April 14, 2025.

Stakeholder Impact

• Shareholders: The formation of a consolidated voting group with 61.4% of total voting power may reduce the influence of other shareholders on Board elections and strategic decisions. However, it could also lead to more stable and aligned long-term governance.
• Management/Employees: Key executives are incentivized through performance-based equity awards tied to revenue growth, Adjusted EBITDA margin, and Total Shareholder Return, aligning their interests with company performance.

Next Steps

• Continued vesting of restricted shares and RSUs for Ned N. Fleming, IV on September 30, 2025, 2026, 2027, and 2028.
• Continued vesting of restricted shares for Fred J. Smith, III on September 30, 2025, 2026, 2027, and 2028.
• Determination of vested PSUs for Ned N. Fleming, IV's 2023 LTIP-B Award Agreement based on performance through September 30, 2026.
• Determination of vested PSUs for Fred J. Smith, III's 2022 LTIP-B Award Agreement based on performance through September 30, 2025.
• Determination of vested PSUs for Fred J. Smith, III's 2023 LTIP-B Award Agreement based on performance through September 30, 2026.
• Determination of vested PSUs for Ned N. Fleming, IV's 2025 LTIP-B Award Agreement and Fred J. Smith, III's 2025 LTIP-B Award Agreement based on performance through September 30, 2027.

Key Dates

Keywords

Construction Partners, SEC Filing, Schedule 13D, Beneficial Ownership, Voting Agreement, Corporate Governance, Class A Common Stock, Class B Common Stock, Insider Ownership, Equity Incentive Plan, Performance Stock Units, SunTx Capital Partners