An acceleration in larger-scale food and drink deals is likely in 2011 as private equity houses shuffle assets and the underlying valuation of businesses picks up, according to a new report.

Oghma Partners' 2010 M&A review and 2011 outlook report shows that, even excluding Cadbury/Kraft, 2010's total deal value of £3.9bn was more than triple the £1.25bn reported in 2009, even though total deal volume fell 12% y-o-y to 64, almost half the number in 2007 (114).

And larger-scale deals, such as last week's A$290m (£183m) sale of the UK, South African and Australian wine business of Constellation Brands, along with its 50% stake in wholesaler Matthew Clark, were likely to continue, said Oghma partner Mark Lynch.

"If you're a big company that has sorted out your relationship with the bank, you're likely to be in a better position for some form of transaction. That's probably why we're seeing pick-up at the larger end of the scale," he explained.

The £13.7bn swoop on Cadbury by Kraft was also likely to instill confidence in large company deals, he added, noting the difficult climate for IPOs and the need for private equity firms to realise their investments.

Interest from overseas businesses was unlikely to let up after a 2010 where they accounted for 44% of buyers versus 24% in 2009.

"If you look at who's got money at the moment, Asia looks like a fruitful source. In Latin America we have seen activity from meat processors and I wouldn't be surprised if we saw more interest there."

Improved equity valuations for food businesses fuelled by consolidation such as the proposed Northern Foods/Greencore tie-up and divestments by Premier Foods could boost transaction values further. Coupled with possible higher interest rates and capital gains tax, smaller businesses could also be lured, Lynch added.

"A higher equity value on listed food and drink companies has a rub-off ­effect on private values."