The most common and most likely answer to this crossword clue is the 10 letter word WASSAILING
I've seen this crossword clue in The Times
W
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Buddy explains!

The straight part
We know that "making merry" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case making merry = wassailing.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 WASSAILING mean?
WASSAILING verb- To toast, to drink to the health of another.
- To drink wassail.
- To go from house to house at Christmastime, singing carols.
- The act of performing a wassail.