diff --git a/.github/actions/universal-detect-changes-and-generate-changelog/README.md b/.github/actions/universal-detect-changes-and-generate-changelog/README.md
index fe61de1..963033d 100644
--- a/.github/actions/universal-detect-changes-and-generate-changelog/README.md
+++ b/.github/actions/universal-detect-changes-and-generate-changelog/README.md
@@ -4,6 +4,8 @@ This GitHub Action detects changes since the last built commit and generates a c
 
 ## Features
 
+- ✅ **Nested Merge Detection**: Detects ALL merged branches including nested merges (e.g., B→A→develop reports both A and B)
+- ✅ **Smart Filtering**: Automatically filters out reverse merges (main→feature) used for conflict resolution
 - ✅ **Modular Design**: Split into separate bash scripts for better maintainability
 - ✅ **Customizable Cache Keys**: Support for custom cache key prefixes (format: `latest_builded_commit-` or `{prefix}-latest_builded_commit-`)
 - ✅ **GitHub-Native**: Leverages GitHub's built-in branch handling (no manual sanitization)
@@ -18,6 +20,8 @@ This GitHub Action detects changes since the last built commit and generates a c
 | `debug` | No | `false` | Enable debug mode for detailed logging |
 | `fallback_lookback` | No | `"24 hours"` | Time to look back for merge commits when no previous build commit is found |
 | `cache_key_prefix` | No | - | Custom prefix for cache keys. If not provided, will use `latest_builded_commit-`. If provided, format will be `{prefix}-latest_builded_commit-` |
+| `use_git_lfs` | No | `false` | Whether to download Git-LFS files during checkout |
+| `exclude_source_branches` | No | `"(main\|develop\|master)"` | Exclude merged commits of given branches. Regex pattern (ERE). Example: `"(release.*\|hotfix.*)"` |
 
 ## Outputs
 
@@ -28,6 +32,31 @@ This GitHub Action detects changes since the last built commit and generates a c
 | `merged_branches` | List of merged branch names |
 | `cache_key` | Cache key to store latest built commit for this branch |
 
+## Nested Merge Detection
+
+The action detects **all merged branches** including nested merges where one feature branch merges into another before merging to main.
+
+### How It Works
+
+**Example:** Branch B merges into branch A, then A merges into develop
+- **Output:** Both `feature-A` and `feature-B` are detected
+- **Filtering:** Reverse merges (e.g., `develop→feature-A` for conflict resolution) are automatically excluded
+
+### Implementation Details
+
+- **Branch Names**: Uses `git log --merges` (without `--first-parent`) to see all merge commits
+- **Changelog Messages**: Uses `git log --merges --first-parent` to follow only main branch history
+- **Filtering**: Excludes source branches via `grep -v "Merge branch '(EXCLUDE_SOURCE_BRANCHES)' into"`
+
+### Performance Considerations
+
+Removing `--first-parent` for branch detection means git traverses more of the commit graph:
+- **Impact**: Minimal for typical workflows (10-100 commits between builds)
+- **Large histories**: May add 1-2 seconds for repos with 1000+ commits in the range
+- **Recommendation**: Use `checkout_depth` to limit git history fetch depth if needed
+
+The performance tradeoff is generally acceptable given the improved accuracy in branch detection.
+
 ## Scripts
 
 ### `cache-keys.sh`
@@ -53,16 +82,17 @@ Determines commit range and skip build logic.
 - `to_commit`: Ending commit for changelog
 
 ### `generate-changelog.sh`
-Generates formatted changelog and branch names.
+Generates formatted changelog and branch names with nested merge detection.
 
 **Environment Variables:**
 - `FROM_COMMIT`: Starting commit
 - `TO_COMMIT`: Ending commit
+- `EXCLUDE_SOURCE_BRANCHES`: Regex pattern for excluding source branches (default: `(main|develop|master)`)
 - `DEBUG`: Debug mode flag
 
 **Outputs:**
-- `changelog_string`: Formatted changelog
-- `merged_branches`: List of merged branches
+- `changelog_string`: Formatted changelog (from main branch history only)
+- `merged_branches`: List of all merged branches (includes nested merges)
 
 ## Testing
 
@@ -78,6 +108,7 @@ The action includes comprehensive unit tests using BATS (Bash Automated Testing
 bats test/test_cache-keys.bats
 bats test/test_determine-range.bats
 bats test/test_generate-changelog.bats
+bats test/test_merged-branches.bats
 ```
 
 ### CI Testing
@@ -94,6 +125,9 @@ Tests run automatically on pull requests when relevant files change. The CI work
 - ✅ Commit range determination logic
 - ✅ Skip build decision making
 - ✅ Changelog generation and formatting
+- ✅ **Nested merge detection** (B→A→develop, C→B→A→develop)
+- ✅ **Reverse merge filtering** (conflict resolution exclusion)
+- ✅ **Custom target branch patterns**
 - ✅ Error handling and edge cases
 - ✅ Debug output functionality
 - ✅ Git command failure scenarios
diff --git a/.github/actions/universal-detect-changes-and-generate-changelog/action.yml b/.github/actions/universal-detect-changes-and-generate-changelog/action.yml
index c910133..984178b 100644
--- a/.github/actions/universal-detect-changes-and-generate-changelog/action.yml
+++ b/.github/actions/universal-detect-changes-and-generate-changelog/action.yml
@@ -24,6 +24,10 @@ inputs:
     description: 'Whether to download Git-LFS files during checkout. Default is false.'
     type: boolean
     default: false
+  exclude_source_branches:
+    required: false
+    description: 'Exclude merged commits of given branches. Regex pattern (ERE). Example: "(release.*|hotfix.*)"'
+    default: "(main|develop|master)"
 
 outputs:
   skip_build:
@@ -91,3 +95,4 @@ runs:
         FROM_COMMIT: ${{ steps.determine_range.outputs.from_commit }}
         TO_COMMIT: ${{ steps.determine_range.outputs.to_commit }}
         DEBUG: ${{ inputs.debug }}
+        EXCLUDE_SOURCE_BRANCHES: ${{ inputs.exclude_source_branches }}
diff --git a/.github/actions/universal-detect-changes-and-generate-changelog/generate-changelog.sh b/.github/actions/universal-detect-changes-and-generate-changelog/generate-changelog.sh
index 4e70baf..cef397a 100755
--- a/.github/actions/universal-detect-changes-and-generate-changelog/generate-changelog.sh
+++ b/.github/actions/universal-detect-changes-and-generate-changelog/generate-changelog.sh
@@ -4,6 +4,7 @@
 # Global variables
 FROM_COMMIT="$FROM_COMMIT"
 TO_COMMIT="$TO_COMMIT"
+EXCLUDE_SOURCE_BRANCHES="${EXCLUDE_SOURCE_BRANCHES:-(main|develop|master)}"
 FORMATTED_CHANGELOG=""
 FORMATTED_BRANCH_NAMES=""
 
@@ -15,10 +16,14 @@ debug_log() {
 }
 
 # Get git log for changelog (commit messages)
+# NOTE: This intentionally uses --first-parent to follow the main branch history.
+# We only want changelog messages from direct merges to the main branch, not from
+# nested feature branch merges. Branch name detection (get_branch_names) does NOT
+# use --first-parent so it can detect nested branches.
 get_changelog() {
   local from_commit="$1"
   local to_commit="$2"
-  
+
   if [ "$from_commit" == "$to_commit" ]; then
     debug_log "FROM_COMMIT is same as HEAD. Using range HEAD~1..HEAD"
     git log --merges --first-parent --pretty=format:"%b" HEAD~1..HEAD 2>&1
@@ -34,14 +39,16 @@ get_changelog() {
 get_branch_names() {
   local from_commit="$1"
   local to_commit="$2"
-  
+
   if [ "$from_commit" == "$to_commit" ]; then
-    git log --merges --first-parent --pretty=format:"%s" HEAD~1..HEAD | \
+    git log --merges --pretty=format:"%s" HEAD~1..HEAD | \
+      grep -v -E "Merge branch '(${EXCLUDE_SOURCE_BRANCHES})' into" | \
       sed -e "s/^Merge branch '//" -e "s/^Merge pull request .* from //" -e "s/' into.*$//" -e "s/ into.*$//" | \
       grep -v '^$' 2>&1 || true
     return 0
   else
-    git log --merges --first-parent --pretty=format:"%s" "${from_commit}..${to_commit}" | \
+    git log --merges --pretty=format:"%s" "${from_commit}..${to_commit}" | \
+      grep -v -E "Merge branch '(${EXCLUDE_SOURCE_BRANCHES})' into" | \
       sed -e "s/^Merge branch '//" -e "s/^Merge pull request .* from //" -e "s/' into.*$//" -e "s/ into.*$//" | \
       grep -v '^$' 2>&1 || true
     return 0
@@ -135,11 +142,14 @@ main() {
   
   if [ "$FROM_COMMIT" == "$TO_COMMIT" ]; then
     debug_log "FROM_COMMIT is same as HEAD. Using range HEAD~1..HEAD"
+    # Changelog uses --first-parent to follow main branch history only
     raw_changelog=$(git log --merges --first-parent --pretty=format:"%b" HEAD~1..HEAD 2>&1)
     git_exit_code=$?
-    
+
     if [ $git_exit_code -eq 0 ]; then
-      raw_branch_names=$(git log --merges --first-parent --pretty=format:"%s" HEAD~1..HEAD 2>&1 | \
+      # Branch names do NOT use --first-parent to detect nested merges
+      raw_branch_names=$(git log --merges --pretty=format:"%s" HEAD~1..HEAD 2>&1 | \
+        grep -v -E "Merge branch '(${EXCLUDE_SOURCE_BRANCHES})' into" | \
         sed -e "s/^Merge branch '//" -e "s/^Merge pull request .* from //" -e "s/' into.*$//" -e "s/ into.*$//" | \
         grep -v '^$' 2>&1 || true)
       git_exit_code=0
@@ -148,11 +158,14 @@ main() {
     fi
   else
     debug_log "Using range ${FROM_COMMIT}..${TO_COMMIT}"
+    # Changelog uses --first-parent to follow main branch history only
     raw_changelog=$(git log --merges --first-parent --pretty=format:"%b" "${FROM_COMMIT}..${TO_COMMIT}" 2>&1)
     git_exit_code=$?
-    
+
     if [ $git_exit_code -eq 0 ]; then
-      raw_branch_names=$(git log --merges --first-parent --pretty=format:"%s" "${FROM_COMMIT}..${TO_COMMIT}" 2>&1 | \
+      # Branch names do NOT use --first-parent to detect nested merges
+      raw_branch_names=$(git log --merges --pretty=format:"%s" "${FROM_COMMIT}..${TO_COMMIT}" 2>&1 | \
+        grep -v -E "Merge branch '(${EXCLUDE_SOURCE_BRANCHES})' into" | \
         sed -e "s/^Merge branch '//" -e "s/^Merge pull request .* from //" -e "s/' into.*$//" -e "s/ into.*$//" | \
         grep -v '^$' 2>&1 || true)
       git_exit_code=0
diff --git a/.github/actions/universal-detect-changes-and-generate-changelog/test/test_merged-branches.bats b/.github/actions/universal-detect-changes-and-generate-changelog/test/test_merged-branches.bats
new file mode 100644
index 0000000..d1fa9cc
--- /dev/null
+++ b/.github/actions/universal-detect-changes-and-generate-changelog/test/test_merged-branches.bats
@@ -0,0 +1,470 @@
+#!/usr/bin/env bats
+
+# Tests specifically for FORMATTED_BRANCH_NAMES output
+# These tests focus on the branch name detection and extraction logic,
+# separate from the changelog message formatting tests.
+
+load 'test_helper'
+
+# =============================================================================
+# NESTED MERGE DETECTION:
+# The generate-changelog.sh script now uses `git log --merges` (without --first-parent)
+# combined with negative filtering to detect ALL merged branches including nested ones.
+#
+# The filtering logic: grep -v "Merge branch '(EXCLUDE_SOURCE_BRANCHES)' into"
+# - Removes reverse merges (main→feature) used for conflict resolution
+# - Keeps all forward merges (feature→feature and feature→main)
+#
+# This means nested merges (B→A→develop) now correctly detect both A and B!
+# The tests below verify this behavior across various scenarios.
+# =============================================================================
+
+@test "merged-branches: detects nested merge when B is squash-merged to develop via A" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Simulate git history where feature-A squashes commits from feature-B
+  # Then feature-A merges to develop
+  # In this case, when A is merged to develop, the changelog includes B's work
+  # but B never directly merged to develop
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A changelog"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          # Only the merge to develop is visible since B was squashed into A
+          echo "Merge branch 'feature-A' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Only feature-A is detected (B was squashed, no separate merge commit)
+  # This is correct: B's commits are part of A, but B never had its own merge commit
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A" ]
+
+  # NOTE: If feature-B had a separate merge commit into feature-A, and then
+  # feature-A merged to develop, BOTH A and B would be detected (see next test).
+  # This test shows the squash-merge case where B has no separate merge commit.
+}
+
+@test "merged-branches: detects true nested merge B→A→develop with separate merge commits" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Simulate git history where BOTH merges are present:
+  # 1. feature-B has a merge commit into feature-A
+  # 2. feature-A has a merge commit into develop
+  # Without --first-parent, git log sees BOTH merge commits
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A and B work"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          # Git log --merges (without --first-parent) returns BOTH merges
+          echo "Merge branch 'feature-B' into feature-A"
+          echo "Merge branch 'feature-A' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # With NEGATIVE filtering: grep -v "Merge branch '(main|develop|master)' into"
+  # - "Merge branch 'feature-B' into feature-A" is INCLUDED (B is not main/develop/master)
+  # - "Merge branch 'feature-A' into develop" is INCLUDED (A is not main/develop/master)
+  # Result: Both feature-A and feature-B are detected
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B" ]
+
+}
+
+@test "merged-branches: filters out conflict resolution merges (develop→A, then A→develop)" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Simulate git history:
+  # 1. develop merges into feature-A (conflict resolution - should be filtered out)
+  # 2. feature-A merges into develop (actual feature merge - should be detected)
+  #
+  # Without --first-parent, git log sees BOTH merges, but negative filtering removes reverse merge
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A implementation"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          # Both merges are now visible
+          echo "Merge branch 'develop' into feature-A"
+          echo "Merge branch 'feature-A' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # With NEGATIVE filtering: grep -v "Merge branch '(main|develop|master)' into"
+  # - "Merge branch 'develop' into feature-A" is FILTERED OUT (develop matches the pattern)
+  # - "Merge branch 'feature-A' into develop" is INCLUDED (feature-A doesn't match)
+  # Result: Only feature-A is detected
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A" ]
+
+  # This is CORRECT behavior - conflict resolution merges (main→feature) are filtered out
+}
+
+@test "merged-branches: multiple nested branches C→B→A→develop" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Simulate git history:
+  # 1. Branch C merges into branch B
+  # 2. Branch B merges into branch A
+  # 3. Branch A merges into develop
+  #
+  # Without --first-parent, all merge commits are visible
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A with nested changes"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          # All merge commits are now visible
+          echo "Merge branch 'feature-C' into feature-B"
+          echo "Merge branch 'feature-B' into feature-A"
+          echo "Merge branch 'feature-A' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Detects all nested branches A, B, and C
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B, feature-C" ]
+
+}
+
+@test "merged-branches: parallel merges A and B separately to develop (WORKING CASE)" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+
+  # Simulate git history:
+  # 1. Branch A merges into develop
+  # 2. Branch B merges into develop
+  #
+  # Both are on the first-parent path, so both should be detected
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A implementation"
+          echo "Feature B implementation"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'feature-A' into develop"
+          echo "Merge branch 'feature-B' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # CURRENT BEHAVIOR: Correctly detects both A and B
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B" ]
+
+  # This is the EXPECTED working case - parallel merges work correctly
+}
+
+@test "merged-branches: mixed scenario with nested and parallel merges" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Simulate git history:
+  # 1. Branch B merges into branch A (nested)
+  # 2. Branch A merges into develop
+  # 3. Branch C merges into develop (parallel)
+  #
+  # All should be detected now
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature A with nested B"
+          echo "Feature C standalone"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'feature-B' into feature-A"
+          echo "Merge branch 'feature-A' into develop"
+          echo "Merge branch 'feature-C' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Detects A, B, and C
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B, feature-C" ]
+
+}
+
+@test "merged-branches: handles pull request merge format" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  # Test that pull request merge commits are properly parsed
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "PR body content"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge pull request #123 from org/feature-branch"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Should extract the branch name from the pull request format
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "org/feature-branch" ]
+}
+
+@test "merged-branches: handles branch names with special characters" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature work"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'feature/PROJ-123/add-new-feature' into develop"
+          echo "Merge branch 'bugfix/HOTFIX-456_critical-fix' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Should handle slashes, hyphens, underscores correctly
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "bugfix/HOTFIX-456_critical-fix, feature/PROJ-123/add-new-feature" ]
+}
+
+@test "merged-branches: deduplicates branch names across merge commits" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Multiple merges"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'feature-A' into develop"
+          echo "Merge branch 'feature-B' into develop"
+          echo "Merge branch 'feature-A' into develop"  # Duplicate
+          echo "Merge branch 'feature-C' into develop"
+          echo "Merge branch 'feature-B' into develop"  # Duplicate
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Should deduplicate and sort
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B, feature-C" ]
+}
+
+@test "merged-branches: handles empty output when no merges found" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Some changelog"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo ""  # No merge commits
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Should handle empty branch names gracefully
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "" ]
+}
+
+@test "merged-branches: handles branch names with quotes" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(main|develop|master)"
+
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature work"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'feature-\"quoted\"-name' into develop"
+          echo "Merge branch 'another-'single'-quoted' into develop"
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Should preserve quotes in branch names
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "another-'single'-quoted, feature-\"quoted\"-name" ]
+}
+
+@test "merged-branches: uses default target branches when not specified" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  # Explicitly unset EXCLUDE_SOURCE_BRANCHES to test default fallback
+  unset EXCLUDE_SOURCE_BRANCHES
+
+  # Test that default (main|develop|master) is used
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Feature work"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'develop' into feature-A"  # Should be filtered (matches default)
+          echo "Merge branch 'feature-A' into main"  # Should be included
+          echo "Merge branch 'feature-B' into develop"  # Should be included
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # Default pattern (main|develop|master) filters out reverse merges
+  # - "Merge branch 'develop' into feature-A" is FILTERED OUT (develop matches default)
+  # - "Merge branch 'feature-A' into main" is INCLUDED
+  # - "Merge branch 'feature-B' into develop" is INCLUDED
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B" ]
+
+  # This verifies the default fallback works correctly
+}
+
+@test "merged-branches: supports custom target branch pattern" {
+  export FROM_COMMIT="base-commit"
+  export TO_COMMIT="HEAD"
+  export DEBUG="false"
+  export EXCLUDE_SOURCE_BRANCHES="(release|production)"
+
+  # Test custom target branch filtering
+  git() {
+    case "$1" in
+      "log")
+        if [[ "$*" == *"--pretty=format:%b"* ]]; then
+          echo "Release work"
+        elif [[ "$*" == *"--pretty=format:%s"* ]]; then
+          echo "Merge branch 'main' into feature-A"  # Should be filtered out
+          echo "Merge branch 'feature-A' into release"  # Should be included
+          echo "Merge branch 'feature-B' into production"  # Should be included
+          echo "Merge branch 'feature-C' into develop"  # Should be included (not filtered by custom pattern)
+        fi
+        return 0
+        ;;
+    esac
+  }
+  export -f git
+
+  run "$BATS_TEST_DIRNAME/../generate-changelog.sh"
+
+  [ "$status" -eq 0 ]
+
+  # The negative filter grep -v "Merge branch '(release|production)' into"
+  # excludes merges where release or production is the SOURCE branch
+  # "Merge branch 'main' into feature-A" - source is 'main', doesn't match, INCLUDED
+  # "Merge branch 'feature-A' into release" - source is 'feature-A', doesn't match, INCLUDED
+  # Result: All branches are included since none have release/production as source
+  [ "$(grep '^merged_branches=' "$GITHUB_OUTPUT" | cut -d= -f2)" = "feature-A, feature-B, feature-C, main" ]
+
+  # This demonstrates that EXCLUDE_SOURCE_BRANCHES is configurable for different workflows
+}