Private equity groups have helped drive the value of M&A activity in the European food and drink manufacturing sector to £8.3bn in the first three months of this year - exceeding already the figure for the whole of 2006.

In the first two months of 2007, £2.5bn worth of business was done and a further £5.8bn of deals are pending, £5.2bn of which relates to deals announced in 2006, according to the latest Food Insights report from PricewaterhouseCoopers.

Last year, the total value of completed mergers and acquisitions reached £7.2bn.

The deals themselves have been larger as well. Among the biggest so far is the pending £1.6bn secondary buyout of UB by Blackstone and PAI and the £1.2bn acquisition of RHM by Premier Foods. In 2006, the largest completed deal was Permira's £1.17bn leveraged buyout of Unilever Europe's frozen food business.

Total activity for 2007 was set to be at least double the figure for the first quarter, said Neil Sutton, partner and head of corporate finance, PricewaterhouseCoopers. "With record funds at their disposal, private equity buyers accounted for over 40% of M&A activity by value in the sector in 2006 compared with 25% in the prior year.

"Food manufacturing's relatively stable cash flows, iconic brands and profitable niches, not to mention opportunities to take out cost, will ensure private equity sustains a healthy appetite for the food sector in 2007."

Buyers would continue to look for businesses in higher-growth, higher-margin niches such as functional and medical, premium, organic, ethical and ethnic brands, said Sutton.

There would also be continued demand for businesses in fragmented sectors, such as confectionery and biscuits, he added, citing last Sunday's acquisition of Burton's by Duke Street Capital.

However, there could also be a spate of demergers in the wake of Cadbury Schweppes' decision to split its business in two, he said.