The England Under-19 striker is the subject of a 'substantial' Forest bid as Gary Megson looks for the man to shoot his side to promotion.
Merson though believes that Fryatt is worth at least as much as former Bristol City striker Leroy Lita, who moved to Reading in the summer after a prolific season in League One.
"Leroy Lita went from Bristol City to Reading for £1m and Matty has got more potential than him," said the Walsall boss.