In
Tools/Options/Diff/Merge Tool
I selected KDiff3.
KDiff3 is installed in
C:\Program Files (x86)\KDiff3\kdiff3.exe

I merged a feature branch in master and have a merge conflict.
I rightclick on my file and select
Resolve Conflicts / Launch external merge tool.
It creates a number of files:
.BACKUP.
.BASE.
.LOCAL.
.REMOTE

But it does not launch KDiff3.