The economic problems were too much for Orson Merrill. In May of 1860, he left to help build mining machinery for Colorado prospectors at Pike's Peak. After Orson's departure, John Merrill probably merged his quarter interest into the rest of the reaper factory. Although John Merrill held on to his interest until 1862, the separate entity, the J. B. and 0. E. Merrill Machine Shop, was dead. However, it soon came to life again.
Orson returned to Beloit late in 1860 (13)and, with the assistance of one pattern maker and a laborer, founded a new machine shop. He located his small shop southeast of the reaper factory on the west side of Second Street. (14) Since he was no longer on the Head Race, Orson ran his machinery with a steam engine. In 1864, he combined steam and water power after he completed a flume that ran from the bottom of the Head Race, southeast across D street, and into the factory.
0. E. Merrill and Company, as the machine shop was now called, built the same types of products that were previously manufactured by the J. B. and 0. E. Merrill Machine Shop. But, some time during the early 1860s, a change occurred that was to lead 0. E. Merrill and Company toward the manufacturing of papermaking machinery.
During the 1860s, Beloit was becoming a midwestern papermaking center. In 1851, the first paper mill in the area had been built by another Merrill brother, Sereno T. Merrill, along with Theodore Wright. This mill was located four miles south of Beloit in Rockton, Illinois.
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