For whatever reason my Unity install (5.1.1p2) was missing both UnityYAMLMerge.exe, and mergespecfile.txt. I was able to download the merge tool, but I have no idea what needs to be in mergespecfile. It should be located in:
C:\Program Files (x86)\Unity\Editor\Data\Tools
Would someone be willing to send me their mergespecfile, or paste the contents so I can copy and make my own. Please, and thank you.
EDIT: HA! Boy am I a moron. The error I was getting was saying that there was no tool for .mat extensions, and then I looked in my Program Files(x86) like an idiot, saw there wasn’t a file and assumed that was the problem.
So does Smart Merge not handle materials?