During my two days NAV ALM using TFS training I got the question how I did configure my Visual Studio client to work with Araxis instead of the built-in compare tool. I easily could show them how it was configured.
Nevertheless I had to admit I didn't think up this myself. So I googled for TFS how to set Araxis as compare tool and directly did hit the blog post that helped me so much ever since I am using TFS:
diff/merge configuration in Team Foundation - common Command and Argument values by James Manning
He does not only give settings for Araxis but for many more compare tools including Beyond Compare. And ... also settings to use external tools for merging. But I never have used that as the internal tool has an important advantage over Araxis Merge: it's much easier to select/include code into the result from either source or destination.