The value of the firm is increasing when the firm purchase acquisitions with debt financing because debt is secured by the assets of the company. A profitable business can generate cash flow or income to repay interest and principal of the loan. The main reason for taking an acquisition debt is to make a large purchase without having to deploy large sum of capital. Berkshire Hathaway is a very profitable company, even though they showed some loss in their revenue in the last quarter due to natural disasters. This is a risky approach, however, if the acquisition can create stronger and more profitable company, then the debt is valuable.
