Lee departs Walsall
The news comes in the wake of Plymouth Argyle's approach for Lee.
The Second Division outfit are considering Lee, along with five other managers for the Home Park hot-seat - but they will not make a decision until next week.
Walsall supremo Jeff Bonser explained the situation, saying: "The decision by Plymouth Argyle FC to delay the announcement of their new manager has created an atmosphere of intense uncertainty at a crucial stage of the season.
"The situation was created by Colin Lee being prepared to talk to Plymouth Argyle about their managerial vacancy just six months after pledging his long-term future to Walsall FC," he told the club's official website.
"The uncertainty that has been caused has had to be dealt with, and I believe this decision to be in the best interests of Walsall FC."
Bracewell felt it was right to follow Lee out of The Bescot Stadium.
"Colin Lee brought me to the club to work with him, and it seems right that if he departs, I should go too," he added.
Merson has now been handed the manager's role for at least one game, and he will be assisted by Simon Osborn for the match at Carrow Road.