The Intrinsic Value Podcast - The Investor’s Podcast Network TIVP046: TransDigm (TDG): A Conglomerate of Monopolies w/ Daniel Mahncke & Shawn O’Malley
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Nov 16, 2025 Discover how TransDigm transforms ordinary aerospace components into a powerhouse of profitability with its unique pricing strategy. Learn about its monopoly-like control in the market and the philosophy of its founders, who prioritize high margins and innovative acquisitions. The hosts delve into the company's impressive M&A playbook, its resilience during economic downturns, and the significant growth potential in the aviation sector. Plus, they discuss the delicate balance of leveraging debt to enhance returns while navigating regulatory scrutiny.
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Certification Creates Decades-Long Aftermarket
- Once a part is certified for a specific aircraft, that supplier effectively owns the part for decades due to certification rules.
- Airplanes fly 30–50 years on average, creating long aftermarket tails and predictable recurring revenue.
Pricing To Value, Not Cost
- TransDigm prices to perceived value and switching cost rather than to cost, often raising prices after acquisition.
- The DoD found TransDigm charged more than 'fair and reasonable' margins on almost all reviewed contracts, highlighting friction with regulators.
Tiny Part, Huge Margin Example
- Daniel shares that many TransDigm parts have absurd margins because they are tiny relative to aircraft cost and often ignored by OEMs.
- His father at Airbus said parts under ~$800 get reordered without a refund process due to low administrative cost.
