Although I have not personally ridden a Merit 1, it appears to me to have been a fair amount of bike for its very modest price. That said, if you want to significantly upgrade the performance of the components, in my opinion you are probably looking at 105. Depending on how complete it is and what kinds of deals are then available, a complete 105 R7000 groupset could easily run you more than the Merit 1 did. The shifting and braking performance on the new 105 is fantastic in my opinion, but do you really want to put that kind of an investment and groupset on your Merit 1 frame?

I was in a similar situation about ten years ago with an excellent, older steel frame and ancient components. Ultimately, I just decided to keep that bike as it was and buy a whole new, second bike. That bike was a carbon fiber Orbea and for my purposes, it was outstanding. It was the right decision for me.

What's the budget? That's the million-dollar question. A new carbon fiber bike with 105 R7000 from a respected manufacturer will run you anywhere from around maybe $1750.00 on a great deal from maybe last year to sometimes a bit more than $3000 for one totally loaded from the current year and from one of the more expensive manufacturers You may find them for more or less, of course, but these are general parameters.

What I am saying is, decide what you want to spend. Then, you can develop a game plan that makes sense to accomplish your goals.