This could happen if your Windows SDK installation
became corrupted or some features are missing. During a setup package build including MSM packages we use the mergemod.dll library to merge the MSM content into the MSI installation database. So, you can try to reinstall the Windows SDK on your current machine and see if this helps.
Also, the mergemod.dll library should be registered on the system calling regsvr32 with a command line like this:
All the best,