1: The two companies had been negotiating for more than a year.  The issues were complex, but the $20 billion merger between Alcatel and Lucent finally seemed to be lining up.  

There was one final step in the process: a face-to-face meeting between the executives, writes Priya Parker in The Art of Gathering: How We Meet and Why It Matters.

“This deal was supposed to be a marriage of equals,” recalls then Citibank investment banker Chris Varelas, who represented Lucent, the New Jersey-based telecommunications company, in the transaction.  But everyone understood the French giant Alcatel “was going to be more equal,” Priya notes.  

“Until that gathering, the two sides had done a good job of maintaining a useful fiction,” she writes.  The meeting was going to be held at an unremarkable airport hotel in New Jersey so that “no one would know what we’re doing,” Chris recollects.  “Keeping details out of the media was an important priority, to avoid embarrassment on either side should the deal not happen and also to avoid a leak, which can scuttle a deal if the market reaction is negative.”

2: Then, however, a senior director of Alcatel fell ill.  The company requested the meeting be relocated to France where they would meet at Château des Mesnuls, “a fifty-five-room château restored in the Louis XIII style, complete with Persian rugs, gold frescoes, chandeliers, and portraits of famous French soldiers,” Priya writes.

The castle was located one hour from Paris and was owned by an Alcatel subsidiary.  “I’m pretty sure they used it regularly for offsites, which probably worked fine for internal rah-rah planning and strategy sessions but not for a merger negotiation,” Chris reflects.

The executive teams from the two companies met for three eighteen-hour days to finalize the merger agreement.  

“And then, in the final hours, after the Wall Sreet Journal had published news of the impending merger, including the agreed-upon price, Henry Schacht, the chairman of Lucent, walked out of the meeting, and the merger fell apart,” Priya writes.   

“We’re out of here,” he reportedly said.  Deal off.  The sticking point?  Pride.

“Lucent officials are reported to have balked,” the BBC reported at the time, “because they did not believe that Alcatel was treating the deal as a merger of equals.”

“The chateau brought the Frenchness out in the French,” Chris believes.  “We’re sitting in these ballrooms having these discussions,” he remembers, “and you could just see the arrogance and hubris of the Alcatel employees.  They became much more comfortable asserting their dominance than I know they would have if we had been in Jersey.”

3: The message for all of us?

Be intentional about selecting the setting for our meetings and events.  When we choose a venue for logistical reasons, we allow logistics to override our purpose in holding the gathering.  “What many hosts don’t realize is that the choice of venue is one of your most powerful levers over your guests’ behavior.

“Venues come with scripts,” Priya observes.  “We tend to follow rigid if unwritten scripts that we associate with specific locations.  We tend to behave formally in courtrooms, boardrooms, and palaces.  We bring out different sides of ourselves at the beach, the park, the nightclub.”  

Jerry Seinfeld once observed: “The room is doing eighty percent of the job.  And every comedian has had this experience where he’s been in a club, some rich guy sees him and says, ‘Oh, I’m going to have this guy at my party.’ And you go to the party, and they put you on in a living room or in some weird party room.  And you go in the toilet.  And the reason is the context of the room does eighty percent of the work, in terms of giving you a position of advantage over the audience.”

Priya calls this lesson “the Château Principle.”

“I will argue until the day I die that the meeting place we chose killed the deal,” Chris reflects.  

That said, all’s well that ends well: “Five years later, the merger between Lucent and Alcatel finally happened, albeit under the auspices of a new chairman and CEO at Lucent,” Priya writes.  “One presumes they stayed away from chateaus.”

More tomorrow!


Reflection: Do I have an important meeting or event coming up?  How might I use the “Chateau Principle” to my advantage?  

Action: Do it.

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