MERGE doesn't work in SQL 2008 R2 when SQL 2005 is installed

To install our application we use a setup created ad hoc, which (together with many other operations) runs some scripts, including a script that contains the MERGE clause. The minimum requirement is to use MS SQL Server 2008 R2.

A customer get an error when trying to execute the script described above, which says:

Error: Incorrect syntax near the keyword 'MERGE'.

I'm trying to figure out why, since he is using a SQL 2008 R2 database. I've discovered that in the same machine there's a SQL 2005 installation. Could this cause a conflict? Can this has something to do with compatibility level? If I try to run the same script via the SQL 2008 R2 SSMS it works.