Fundraising
What is Most Favored Nation (MFN)?
A most favored nation (MFN) clause in an LP's side letter entitles them to any more favorable terms granted to any other LP in the fund, ensuring they are never treated worse than the best-treated investor.
MFN provisions protect LPs who negotiate side letters from being out-negotiated by other investors. If an LP has MFN rights and the GP later grants another LP a lower management fee or better co-investment terms, the MFN LP is entitled to the same terms.
Not all MFN clauses are equal — they vary in scope (which terms they cover), notification mechanics, and opt-in versus automatic application. Large anchor LPs typically negotiate the strongest MFN provisions.
Also known as: MFN, MFN clause
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