TIVP046: TRANSDIGM (TDG): A CONGLOMERATE OF MONOPOLIES

W/ DANIEL MAHNCKE & SHAWN O’MALLEY

TIVP046: TRANSDIGM (TDG): A CONGLOMERATE OF MONOPOLIES W/ DANIEL MAHNCKE & SHAWN O’MALLEY

16 November 2025

Daniel Mahncke and Shawn O’Malley dive into TransDigm — the aerospace supplier that turned “boring parts” into a compounding machine. Built around proprietary, often sole-source components installed across nearly every commercial and military aircraft in service, TransDigm monetizes decades of aftermarket demand through premium pricing and enviable margins. 

In this episode, Daniel and Shawn unpack TransDigm’s private-equity-style playbook: own niche, proprietary parts with significant aftermarket exposure; run a fiercely decentralized organization; acquire bolt-ons with discipline; and keep an efficient, leveraged capital structure. It’s a model that has delivered roughly a 36% IRR to owners over more than three decades and materially outpaced aerospace peers.

They explore how TransDigm’s installed base and pricing power create a durable moat, how the commercial/defense/aftermarket mix drives resilient cash flows, and where disciplined M&A can still add runway from here. But they also tackle the hard questions investors ask: how sustainable is TransDigm’s aggressive pricing, what are the risks of government scrutiny on defense contracts, and how much runway is left?

Join Daniel Mahncke and Shawn O’Malley as they find out whether TransDigm deserves a spot in the Intrinsic Value Portfolio.

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IN THIS EPISODE, YOU’LL LEARN:

  • What TransDigm does, and how was it founded
  • What makes TransDigm’s founders and philosophy so special
  • How TransDigm uses debt to leverage returns
  • Why TransDigm is basically a monopoly
  • What TransDigm’s M&A Playbook looks like
  • Where future growth is coming from
  • Whether TransDigm is fairly valued
  • Whether Shawn & Daniel add TDG to The Intrinsic Value Portfolio
  • And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Daniel Mahncke: TransDigm is basically a conglomerate of a hundred small monopolies. They buy companies that dominate a specific needs, leverage their pricing power, and then scale it up. They’ve done that for over three decades now, and they compounded at a ridiculous 30% per year.

[00:00:17] Shawn O’Malley: They’ve seen quite some pushback throughout the years though for flexing their pricing power.

[00:00:21] Shawn O’Malley: Maybe just a bit too much. They have these products that they sell for margins of more than a thousand percent in some cases.

[00:00:28] Daniel Mahncke: Even more impressive that despite the outside pressure, no competitor could take market share or even start to compete with TransDigm. I mean, today we will figure out why and where the TransDigm can keep compounding at 30% per year.

[00:00:47] Intro: You are listening to The Intrinsic Value Podcast by The Investor’s Podcast Network. Since 2014, with over 180 million downloads, we’ve learned directly from the world’s best investors. Now we are applying those lessons to analyze businesses and investment opportunities every week, helping you uncover intrinsic value. And now here are your hosts, Shawn O’Malley and Daniel Mahncke.

[00:01:19] Shawn O’Malley: I’m not sure exactly how Daniel found the company for today’s pitch. But I, I like the idea of imagining that on one of our last flights to some TIP event or, or maybe the conference we both attended together in Lisbon recently, that’s where the idea came from. And I say that because the company we’re covering today is TransDigm, and it’s not a company that a lot of people outside of the investment world are probably familiar with.

[00:01:43] Shawn O’Malley: But if you’ve ever buckled a seatbelt, opened a cabin door on a plane or, or just heard the hum of an aircraft engine, then chances are you have interacted with directly or indirectly with a part made by TransDigm. And investors should probably know the company because it has been this just tremendous performer in the last 20 years averaging almost 30% compound annual growth rates since its IPO in 2006.

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