There will be a quality loss the more materials you have. When you have 2 meshes with 2 materials using a texture with a resolution of 4096x4096 each and you set your new texture resolution for the merged actor to 4096x4096 the textures will be reduced to 1024x1024. There are methods to reduce draw calls (e.g. Nanite, reducing material slots) which can be combined with visibility cells, (H)LODs etc. but I think that depends on your scene.
To be honest, right of the box I don’t know for sure. With 4.22 and higher they made changes to the pipeline. Could be possible but I think you should have a look at the unreal tutorials:
