How soon before the combat did you hire the mercs?
When first hired, mercenaies have a morale level of 0.
Also, camel cavalry are weaker at skirmish and pursue than light cavalry or horse archers, but much MUCH better in melee (equivalent to heavy infantry on the attack).
Tactics could have been at play as well -- Byzantines are won to use the Embolon Charge Formation, which boosts heavy cavalry, but greatly weakens heavy infantry.
Mercs were up for a long time, not a morale problem.
The camel cavalry and tactics thing are interesting, but could you give me a simple yes or no? Do you think it possible for two armies with equal numbers (let's even say mostly light infantry and archers vs mostly heavy cavalry and heavy infantry) to develop a scenario in which one side that is winning suddenly loses the last 70% of their morale? Because my fights with rebels says otherwise.
Yes. Because rebels have shitty morale and are almost entirely light infantry and archers (which also have shitty morale).
In your example, the light infantry/archer side is going to be winning the skirmish phase, which comes first.
Then the melee phase kicks in, and holy shit are they going to get steamrolled.
Conversely, when Genghis Khan shows up with his 100,000 horse archers he steamrolls opposing armies with a vengeance because horse archers excel in the skirmish phase. So his army decimates your morale in the skirmish phase, forcing you to retreat, which lets his horse archers follow up in the pursuit phase and wreak some serious damage. If you can ever hold fast against an equal force of horse archers (perhaps with war elephants or tons of heavy cavalry), the melee phase could deal a heavy counterblow. Of course, Altaic leaders with horse archer armies are likely to use the "Retreat and Ambush" tactic, which turns the Phase back to Skirmish and gives horse archers a big bonus.
I would strongly suggest reading up on the CKII
combat mechanics, if you haven't already.