The Merge tool does not combine overlapping lines into one. From the Help:
This tool will not split or alter the geometries from the input datasets. All features from the input datasets will remain intact in the output dataset, even if the features overlap.
ArcGIS Help (10.2, 10.2.1, and 10.2.2)
You can still use Merge, but will then have to follow it up with some more processing. Three follow-ups come to mind (choose one):
1. Build a Topology on the Merged linework, with Rules set in the Topology (example: Must Not Overlap rule). Then run through all the issues that the Topology uncovers and fix them as appropriate. Caveat - you will need to load the shapefiles as Feature Classes in a Feature Dataset into a Geodatabase (File, Personal, or SDE). Also, Rules are not available if one only has a Basic license.
Topology - ArcGIS Help (10.2, 10.2.1, and 10.2.2)
2. Run Dissolve (Data Management). This is a quick way to do it all at once compared to Topology; however, the data will lose individual segments (which may be undesirable) and one won't benefit from the advantage looking at individual issues to spot exceptions like Topology provides.
Dissolve - ArcGIS Help (10.2, 10.2.1, and 10.2.2)
3. Finally, one additional combination method comes to mind if you have an Advanced License - Symmetrical Difference (Analysis). However, I have not ever used this one with lines, so can't verify it will definitely work.
Symdiff - ArcGIS Help (10.2, 10.2.1, and 10.2.2)
EDIT - scratch the idea of using Symdiff. I just tried it on some overlapping line layers and it didn't pan out.
Note - if you find the linework from the merged shapefiles is spatially slightly off, one way to get it to be coincident before doing either of the above is to run the Integrate (Data Management) tool first. One important caveat, though - back up your data first, as the Integrate tool modifies the source data (unlike most tools which create a new output).
Integrate - ArcGIS Help (10.2, 10.2.1, and 10.2.2)
Chris Donohue, GISP
