The acquisition of Red Mill Snacks by Tayto Golden Wonder is the latest sign that private equity groups are losing out to food manufacturers in acquiring smaller businesses, said a leading mergers expert.

Birmingham-based Red Mill - a supplier of value own-label snacks, Mr Porky's pork scratchings and Transform-A-Snacks - was bought for an undisclosed sum by Tayto this week.

Simon Peacock, who advised shareholders in Red Mill owner CF Holdings, said trade buyers were currently better placed than private equity groups to buy food companies. "Trade buyers can extract significant synergies through acquiring competitors in related sectors," said Peacock, head of mergers at Catalyst Corporate Finance. "Compared with equity groups, they are usually not as restricted by the credit crunch for their source of finance. Trade buyers also understand the issues facing the industry much better."

The Red Mill acquisition attracted significant interest from foreign investors, said Peacock, adding that the UK's own-label industry was a highly desirable home for foreign investment.

"British consumers are among the most sophisticated in the world and the combination of this with a willingness to pay premium prices for well-positioned products should continue to see foreign investment competing with UK trade buyers for British companies."