Merging tags allows the Administrator to manage the tags better when a community has large number of tags.
 Path: Community Settings >>Customization>>Tags Settings>>Merge Tags
 How to Merge Tags:

  1) Tag Type : Select the tag type - Predefined or Moderator, which are to be merged .
 2) Tags to Merge : The list on the left shows existing tags which are in use in the community. select one tag at a time and then click on the right arrow button ( -->) . The selected tag is added to the "Tags to Merge" list on right .
 3) Once all the desired tags are added to the "Tags to Merge" list , Enter a new "Merged Tag Name" and click on the "Merge Tags" button.
 4) The ideas which previously were tagged with the merged tag words will now bear the new tag name which was specified in "Merged Tag name " .
The screenshot below shows an idea which is tagged using the the tag-words , bake and baking

Below screenshot shows the idea after merging the tag words "bake" and "baking" with the new merged tag name "baked" 

 5) The community owner gets an email notification on successful merging of tags. This email will be received only if the administrator of the community has the Notification named Administrative Notifications.

Here is a small video showing merging of tags:

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