Most-Favored-Nation (MFN)
Private Equity glossary · Private Equity Fundamentals
Definition
An LPA/side-letter provision granting an LP the right to receive the benefit of more favorable terms that the GP grants to other LPs in their side letters — protecting the LP from being economically subordinated to peers via side-letter concessions. Typically limited to LPs above a commitment threshold (e.g., $100M+) and with carve-outs for sovereign/regulatory-driven provisions (e.g., sovereign immunity, ERISA-specific terms) that legitimately differ across LP types. Operationally, the GP must disclose all material side-letter terms to MFN-eligible LPs, who then elect which terms to import — a complex and often contentious post-close exercise.
Most-Favored-Nation (MFN) in plain English
When investors join a fund, some quietly negotiate special perks in private agreements. An MFN clause is an investor's promise from the manager that 'if you give anyone else a better deal, you have to offer it to me too' — so they can't be secretly out-negotiated by a peer. It's the same idea as a store's price-match guarantee: whatever better bargain someone else got, you're entitled to grab it. It's usually reserved for big investors (say, those putting in $100M or more), with some fair exceptions for perks that only apply to special types of investors like governments. In practice, the manager must reveal the menu of special terms given to others, and MFN investors then pick which ones they want to claim.
Also called: MFN
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