[refurb]

Here is a better example:

X = acquiring company, worth $2B ($1B in debt, but future earnings valued at $3B) Y = acquired company, worth $1B ($0 debt, $1B future earnings)

Merger:

X+Y = $3B (+ some factor account for cost savings or new revenue streams)

Company X was lying about their sales:

X+Y = $0B ($0B from future earnings, $1B in debt + $1B from company Y)

Company declares bankruptcy and debtors come in and get every asset with any value. Shareholders value = $0.