Team Health: Feeling some pain on its IPO

The deal was also a disappointment for the Blackstone Group (BX), which is the main private equity sponsor for Team Health.

But, the fact remains that Team Health is still a solid company. Basically, it is one of the largest outsourcers for health care professional staffing and administration. Some of the services include recruiting, scheduling, credentials, billing, collections, payroll, insurance coverage, continuing education and risk management. For the most part, these are the kinds of noncore things that hospitals would rather off-load to third parties.

In fact, Team Health has roughly 550 customers across 46 states and has a group of 6,100 health care professionals. Moreover, the contracts are usually long term and the renewal rates are high (approximately 98%). Revenues grew 9% to $1.9 billion for the first nine months of this year. Earnings were $55.2 million.

Based on Team Health's estimates, the market opportunity is about $50 billion. Yet, the market is highly fragmented. So, as a public company, Team Health has an opportunity to engage in aggressive M&A to bolster its position.

The lead underwriters on the deal included BofA Merrill Lynch (BAC), Goldman Sachs (GS), Barclays Capital (BCS) and Citi (C).

Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including the including The Complete M&A Handbook. His website is at Taulli.com.