If you have upgraded to CU7, you will need to go to step “Merge code automatically” on Software update checklist.
This feature was introduced with CU7 update and before that you had to merge all the code manually.
One you start merging the code automatically, you may see that it has taken alot of time in processing.
This is because of few issues in the classes SysDiffUtil, SysMergeCreateProject and SysMergeUtil.
You can fix this issue by installing hotfix (KB2919062) from following link.
After installing the hotfix, when you open the Software update checklist once again, you will see the “Merge code automatically” option with a new name i.e. “Detect code upgrade conflicts”.
Run it and you will be able to see the results in an hour so; depending upon the amount of customized code.
Leave your comment, if you face any issue.