It has the same limitation as LVCompare where files have to be renamed to open multiple copies, which breaks all classes and their members. You can do something like I did here https://forums.ni.com/t5/LabVIEW-Idea-Exchange/Add-app-references-to-LVMerge-API/idc-p/4325866/highl... to get unique app instances and folder structures to get unbroken classes.
LVMerge is not very smart. For instance, if you delete and then re add the same node to your block diagram in one branch, when it goes to merge them it will interpret that as you wanting 2 of that node (it seems to be based on GUID so it sees a recreated node as an entirely different thing). I tend to not get good results from it so I usually don't use it, I use LVCompare to see what is different between the branches and manually make edits to incorporate both branches' changes.
The best advice here is to architect your software to limit the potential for merge conflicts occurring: generally this is done by having "smaller" VIs with less responsibility in each VI, thus reducing the chance that a VI is changed in 2 branches that need to be merged. OOP/AF is great for this compared to QMH/DQMH: those giant case structures are an absolute nightmare. It's challenging to even figure out what cases were added to the mega list of cases, moving a terminal or changing a datatype can show as hundreds of changes across cases. With LV classes, if all you do is add VIs there's a decent chance git will auto merge them correctly.
Another nugget is to limit unnecessary changes that result in unneeded conflicts: rule 1 is to enable "separate compiled code" on all files. Another is to revert files that were resaved and committed but don't need to be changed in the main branch: for instance if you edit the private data control of a class, you don't have to resave every member of that class, just those directly affected by the change.
LV Projects have a high chance of being conflicted due to the dependencies list: one strategy there is to delete the dependencies list from the XML in both branches being merged.
