To be honest, I doubt that Kompany can make Munich better next season. Yes, in my opinion Terzic is much better because as you said Terzic knows the Bundesliga very well. I don't know why the club management didn't choose to negotiate with him but there is a possibility that they have also received a rejection from Terzic or they are not aware of the fact that Terzic has left Dortmund. In my personal opinion Kompany still doesn't have the level to coach a team of Munich's level. I'm not underestimating Kompany but statistically Kompany doesn't have a good enough background. But I hope Kompany can prove the trust that has been given to him by the club management.
I agree with you that Terzic is a better selection for Bayern Munich than Kompany. But, if I'm not mistaken, Kompany was appointed as Bayern Munich's head coach before Terzic announced his departure from Dortmund after a fantastic season with a Champions League final. I don't believe Terzic has any misunderstandings with Dortmund, there was news from Fabrizio Romano about a new deal with Dortmund after the Champions League final, but he may have decided to part ways because they failed to win the Champions League, or Dortmund did not provide him with the players he required to compete for a league title.
Terzic, on the other hand did not receive any offers from other clubs and decided to leave. Bayern Munich believes Kompany has the potential to develop this team, we shouldn't underestimate him at this point, Kompany could prove us wrong next season by winning the league title. Of course, with the talented players Bayern Munich is signing right now, they will win the league title next season.