The most common and most likely answer to this crossword clue is the 6 letter word DUGONG
I've seen this crossword clue in Financial Times
D
U
G
O
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G
More clues leading to the result DUGONG
Buddy explains!

The straight part
We know that "mermaid" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case mermaid = dugong.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does DUGONG mean?
DUGONG noun- A plant-eating aquatic marine mammal, of the genus Dugong, found in tropical regions.