Transdigm Incorporated was established in 1993, by W. Nicholas Howley and Douglas W. Peacock, after acquiring Adel Fasteners, Aero Products Component Services, Controlex Corporation and Wiggins Connectors from IMO Industries. Four years later, in 1997, the company purchased Marathon Power Technologies. In 2019, TransDigm Group was named the third best stock of the 2010s, with a total return of 2,015%.
Acquisition of Transdigm Incorporated by Odyssey Investment Partners
In 2003, Transdigm Incorporated was acquired by Odyssey Investment Partners. Near the end of the century, the company acquired Adams Rite Aerospace and Christie Electric. In May 2001, Transdigm Incorporated procured Champion Aviation Products, a supplier of igniters, spark plugs and oil filters from Federal-Mogul Corporation for approximately $160 million. It was at this time that Nicholas Howley took over the position of Chief Executive Officer from Douglas Peacock as Peacock transferred into his role as Chairman of the Board. In March 2019, Transdigm Inc. purchased Esterline Technologies for $4 billion.
Formation of Transdigm Group Incorporated
In 2003, Transdigm Group Incorporated was formed by Warburg PincusPrivate Equity VIII to acquire Transdigm Incorporated. This transaction materialized shortly after TransTechnology Corporation sold Norco, Inc. to Marathon Power Technologies. Then, in 2004, Transdigm Group procured Avionic Instruments of Avenel, New Jersey, a supplier of specialized power conversion devices for aerospace products. The following year, Transdigm Group purchased Skurka Engineering of Camarillo, California, a manufacturer and distributor of electromagnetic equipment as well as the Fluid Regulators division of Esterline Technologies, who manufactures flight control valves and pressure valves. In June 2006, the company then procured both Sweeney Engineering and Electra-Motion Industries for a grand total of $27 million, along with CDA InterCorp in October of that year for an additional $45 million. Three months later, Aviation Technologies, a producer of avionics and instruments, became a part of the TransDigm family followed by Bruce Industries, a producer of fluorescent aircraft lighting, in August 2007.
On January 20, 2017, Citron Research published a report on TransDigm highlighting its debt-financed acquisitions followed by deep cost cuts and "price gouging". CR published another report on March 9, 2017, accusing TransDigm of illegal activity, noting that twelve of its subsidiaries failed to report their common ownership on federal forms under penalty of perjury. CR pointed out that this omission could be used to defeat federal procurement cost controls. On March 20, 2017, U.S. Representative Ro Khanna sent a letter to the Department of Defense Inspector General describing reports of "waste, fraud, and abuse" by TransDigm Group and calling for an investigation. He wrote that TransDigm was able to operate as a "hidden monopoly" because its subsidiaries failed to report their common corporate ownership on filings with the Department of Defense. This omission allowed TransDigm to avoid the requirement that monopoly suppliers to DoD report their costs. The letter also cited several large price increases that occurred after the suppliers had been acquired by TransDigm. For example, a cable assembly increased in price from $1737 to $7863. Rep. Khanna's letter asked the DoD Inspector General to investigate TransDigm price increases borne by DoD and whether performance improvements were behind the increases, how procurement officers would have treated TransDigm differently had their filings been accurate, how to lower short-term costs to DoD of procurement from TransDigm subsidiaries.
Pentagon price-gouging congressional hearing
From 2013-2015, TransDigm charged The Pentagon a markup of 9,400% on a half-inch metal pin. In February 2019, a DoD Inspector General review of 113 contracts showed that, of 112 contracts, "only one part purchased under one contract was awarded with a reasonable profit of 11 percent. The remaining 112 contracts had profit percentages ranging from 17 to 4,451 percent for 46 parts." Subsequently, in May 2019, Congressional charges of price-gouging were levied against the company, and congressional hearings followed. TransDigm was accused of spare parts markups during 2015-2017 as high as 4,436 percent, according to then-Acting Inspector General Glenn Fine. During the hearings, Transdigm executive chairman Nick Howley, when questioned by U.S. Representative for New York's 14th congressional districtAlexandria Ocasio-Cortez, stated that "the government always has the choice of what to buy and what not to buy from us." While it was assessed that "Transdigm overcharged the U.S. by 16.1M out of $29.7M in contracts", no fines were levied; Transdigm agreed to return the $16.1M in overcharges following the "contentious hearings", without admitting any wrongdoing.
