Setting custom diff/merge tool in TFS/Visual Studio

In order to set Beyond Compare (or other custom tool) as the default tool for diff/merge operation in Team Foundation Server plugin for Visual Studio, do the following:

 

TEAM FOUNDATION SERVER (TFS)

Diff

1. In Visual Studio Choose Options from the Tools menu.
2. Expand Source Control in the treeview.
3. Click Visual Studio Team Foundation Server in the treeview.
4. Click the Configure User Tools button.
5. Click the Add button.
6. Enter ".*" in the Extension edit.
7. Choose Compare in the Operation combobox.
8. Enter the path to BComp.exe in the Command edit.
9. In the Arguments edit, use:
   %1 %2 /title1=%6 /title2=%7

3-way Merge (v3 Pro)

1. Follow steps 1-6 above.
2. Choose Merge in the Operation combobox.
3. Enter the path to BComp.exe in the Command edit.
4. In the Arguments edit, use:
   %1 %2 %3 %4 /title1=%6 /title2=%7 /title3=%8 /title4=%9

2-way Merge (v3 Std, v2)

Use the same steps as the 3-way merge above, but use the command line:
%1 %2 /savetarget=%4 /title1=%6 /title2=%7

 

Source: Beyond Compare support (link)