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TransDigm Group

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TransDigm Group Incorporated
Company typePublic
IndustryAerospace components
Founded1993; 31 years ago (1993)
Founders
  • W. Nicholas Howley
  • Douglas W. Peacock
HeadquartersCleveland, Ohio, U.S.
Key people
  • Kevin Stein (President & CEO)
  • W. Nicholas Howley (Chairman)
RevenueIncrease US$6.585 billion (2023)
Increase US$2.923 billion (2023)
Increase US$1.299 billion (2023)
Total assetsIncrease US$19.97 billion (2023)
Total equityNegative increase US$−1.98 billion (2023)
Number of employees
c. 15,500 (2023)
Websitetransdigm.com
Footnotes / references
Financials as of September 30, 2023.[1]

TransDigm Group Incorporated is an American publicly traded aerospace manufacturing company headquartered in Cleveland, Ohio. TransDigm develops and manufactures engineered aerospace components. It was founded in 1993, when four industrial aerospace companies were combined by a private equity firm in a leveraged buyout. TransDigm expanded the range of aerospace components it manufactures through acquisitions over the years. It filed an initial public offering on the New York Stock Exchange in 2006.

Corporate history

Early history

TransDigm was formed in 1993[2] under the name TD Holding Corporation.[3] It was founded with an initial equity investment of $10 million.[4]: 228  The company was created by founders W. Nicholas Howley and Douglas Peacock, along with private equity firm Kelso & Company, in order to acquire and consolidate four industrial aerospace companies from IMO Industries Inc. in a leveraged buyout.[2][5][6]: 8  Those four companies were Adel Fasteners, Aero Products Component Services, Controlex Corporation and Wiggins Connectors.[4]: 221  Once the acquisitions were completed, TD Holding was renamed to TransDigm, Inc. and based in Richmond Heights, Ohio.[3]: 490 

Originally, TransDigm manufactured and marketed a small group of aircraft components, such as batteries, pumps and fuel connectors.[3]: 490  TransDigm expanded its range of aircraft component products over time through acquisitions of other aerospace component manufacturers,[3]: 492  growing in revenues by about 25% per-year from 1993 to 1998.[7] In 1998, Odyssey Investment Partners, a private equity firm, acquired TransDigm from Kelso & Company.[5] After the September 11th attacks, the aerospace industry declined temporarily, resulting in losses and layoffs for TransDigm.[3]: 491 

By 2002, TransDigm had grown to $300 million in annual revenues,[5] up from $131 million in 1999.[3]: 491  TransDigm was acquired from Odyssey Investment Partners by another private equity firm, Warburg Pincus, in 2003 for $1.1 billion.[5] In 2006, the company went public on the New York Stock Exchange.[8][4]: 220  By the following year, TransDigm had grown to $593 million in annual revenues.[3]: 492 

Acquisitions

TransDigm focuses largely on acquiring other aerospace component manufacturers for expansion and growth.[3]: 492  The company acquired more than 60 businesses in its first 25 years of operations,[4]: 228  49 of which were completed after TransDigm's initial public offering in 2006.[9]

In 2010, TransDigm acquired competing aftermarket aerospace parts company McKechnie Aerospace Holdings for $1.27 billion.[10] In 2016, it bought Data Device Corp., a power, networking and electronics company, for $1 billion.[11] Two years later, TransDigm purchased a competing parts manufacturer, Esterline, for $4 billion.[12] This was the largest acquisition in TransDigm's history.[9]

In March 2022, TransDigm acquired the Montreal-based helicopter mission equipment company, DART Aerospace for approximately $360 million in cash.[13]

In May 2023, TransDigm acquired aviation and transportation research company Calspan for $725 million.[14][15]

In November 2023, TransDigm acquired Electron Device Business of Communications & Power Industries for $1.39 billion.[16]

Products

TransDigm's subsidiaries manufacture engineered aircraft components.[3]: 490  These components include items like pumps, valves and avionics.[4]: 217  Most of the aerospace parts the company sells are proprietary products where TransDigm is the only manufacturer that currently makes the part.[17][18][4]: 223  As of 2016, about half of its revenues are from aftermarket parts and half are from OEM parts.[18] As of 2008, about three-fourths of its revenues were from commercial aircraft parts and one-fourth was from military aircraft parts.[17]

TransDigm's products fall into three segments. Power and control products, such as pumps, valves and ignition systems, account for about half of TransDigm's revenue.[19] Airframe products like latching and locking devices, cockpit security components and audio systems, account for most of the other half of TransDigm's revenues.[19] A smaller portion of the company's business is from non-aviation products, such as restraints, space systems and parts for heavy industrial equipment.[19]

Accusations of price gouging

In 2019, the Department of Defense audited TransDigm's pricing practices for government contracts.[20][21] It concluded that the Pentagon was purchasing parts from TransDigm at very high profit margins, such as a 9,400% markup on a metal pin.[20][21] According to the authors of Lessons from the Titans, this is because older aerospace components are not expensive to produce individually, but require keeping expensive dated manufacturing lines active for small-batch production.[4]: 224–225  After a congressional hearing criticizing TransDigm's pricing practices, the company agreed to refund the Pentagon $16 million.[22]

TransDigm's revenues grew by 15-fold from TransDigm's IPO in 2006 to 2020.[4]: 226  However, business declined in 2020 due to the COVID-19 pandemic's impact on the aerospace industry.[23]

In 2022, founder Nick Howley was again called to testify before Congress on accusations of price gouging.[24] A Department of Defense review alleged that the company charged $119 million for parts that should have cost $28 million,[citation needed] with an earlier 2021 report alleging that TransDigm made an excess profit of $20.8 million on 105 spare parts on 150 contracts.[25][26]

The company's practices and position have also reached the commercial aviation industry, ranging from employees to executives within the aviation industry. A former employee of AvtechTyee, a firm later acquired by TransDigm, commented on how airlines are stuck with TransDigm's parts with a refusal to utilize the company equating to an airline's plane not flying. Concurring on the situation was Abdol Moabery, CEO of the aircraft maintenance company GA Telesis, TransDigm's pricing practices have made it costlier for airlines to repair their planes, with aircraft manufacturers like Boeing and Airbus often caught in the middle when TransDigm acquires companies that Boeing contracted with to make its parts. TransDigm counterargues, though, that its pricing practices are justified when considering its efforts to ensure that planes always fly safely, and that the sting is necessary to continue providing quality service.[27][24]

References

  1. ^ Form 10-K: TransDigm Group Incorporated 2023, U.S. Securities and Exchange Commission, November 9, 2023
  2. ^ a b Eaton, Sabrina (June 18, 2019). "Cleveland aerospace company accused of Pentagon profiteering". cleveland.com. Retrieved October 7, 2020.
  3. ^ a b c d e f g h i Hill, Karen (2011). Transdigm. Vol. 119. St. James Press. ISBN 978-1558628014. {{cite book}}: |work= ignored (help)
  4. ^ a b c d e f g h Davis, Scott; Copeland, Carter; Wertheimer, Rob (2020). Lessons from the Titans. McGraw Hill.
  5. ^ a b c d Sidel, Robin (June 9, 2003). "Warburg Pincus to Acquire TransDigm for $1.1 Billion". The Wall Street Journal. Retrieved October 7, 2020.
  6. ^ Lehman, John; Brooks, Stephen (2000). "Rapid Escalation: An Overview of Private Equity Investing in the Aerospace and Defense Industry". The Journal of Private Equity. 3 (2): 7–11. doi:10.3905/jpe.2000.319955. JSTOR 43503167. S2CID 154809631. Retrieved October 7, 2020.
  7. ^ Thorndike, W. (2012). The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. Harvard Business Review Press. p. 34. ISBN 978-1-4221-6267-5. Retrieved October 7, 2020.
  8. ^ Cowan, Lynn (March 16, 2006). "TransDigm Climbs 15% in IPO, Hitting Middle of Expected Range". The Wall Street Journal. Retrieved October 7, 2020.
  9. ^ a b Banerjee, Arunima (October 10, 2018). "TransDigm dives deeper into aero spare parts market with Esterline buy". Reuters. Retrieved October 7, 2020. in its biggest-ever deal
  10. ^ "TransDigm to buy rival McKechnie for $1.27 bl". Reuters. September 27, 2010. Retrieved October 7, 2020.
  11. ^ Stynes, Tess (May 27, 2016). "TransDigm to Acquire Data Device Corp. for $1 Billion". The Wall Street Journal. Retrieved October 7, 2020.
  12. ^ Gates, Dominic (October 10, 2018). "Aerospace supplier Esterline sold for $4 billion". The Seattle Times. Retrieved October 7, 2020.
  13. ^ "TransDigm Announces Acquisition of DART Aerospace". HeliHub.com. 2022-03-16. Retrieved 2022-03-16.
  14. ^ Glynn, Matt (March 14, 2023). "Calspan to be acquired by a Cleveland-based company". The Buffalo News.
  15. ^ "TransDigm Completes Acquisition of Calspan Corporation". Cision PR Newswire (Press release). May 8, 2023.
  16. ^ "TransDigm Acquires Unit Of Communications & Power Industries | Aviation Week Network". aviationweek.com. Retrieved 2023-11-09.
  17. ^ a b Hoover's Handbook of Emerging Companies 2008: Profiles of America's Most Exciting Growth Enterprises. Hoover's. March 2008. p. 345. ISBN 978-1-57311-123-2.
  18. ^ a b Keller, John (May 27, 2016). "DDC to sell for $1 billion; joining TransDigm commercial and military avionics component supplier". Military and Aerospace Electronics. Retrieved October 7, 2020.
  19. ^ a b c Company Profile: TransDigm Group, The Rational Walk, retrieved October 7, 2020
  20. ^ a b Capaccio, Tony (May 15, 2019). "A Pentagon Contractor's 9,400% Profit on a Half-Inch Metal Pin Is Challenged". Fortune. Retrieved October 7, 2020.
  21. ^ a b Capaccio, Tony. "Pentagon Rips TransDigm for 'Gouging' Taxpayers With $4,361 Metal Pin". Fortune. Retrieved October 7, 2020.
  22. ^ "TransDigm to repay $16 million for overcharging the Pentagon". Reuters. May 24, 2019. Retrieved October 7, 2020.
  23. ^ Suttell, Scott (April 2, 2020). "TransDigm Group will cut up to 15% of its workforce as pandemic reduces demand". Retrieved October 7, 2020.
  24. ^ a b Bogaisky, Jeremy. "Meet The Billionaire Who Built A Fortune 'Price-Gouging' Customers Like The Pentagon". Forbes. Retrieved 2024-07-08.
  25. ^ "Audit of the Business Model for TransDigm Group Inc. and Its Impact on Department of Defen". Department of Defense Office of Inspector General. Retrieved 2024-07-08.
  26. ^ Guest Columnist, cleveland com (2022-03-30). "TransDigm's 'excess profits' on defense contracts reveal costly loopholes in the law: Scott Amey". cleveland. Retrieved 2024-07-08.
  27. ^ Chasan, Aliza (21 May 2023). "How the Pentagon falls victim to price gouging by military contractors". CBS News.
  • Business data for TransDigm Group:
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