Arena in general has quite the learning curve, and with no tutorial or explanation, it's kind of frustrating for new players since they have no idea what to do.
So, to get higher level pieces you will need to collect three of each of the same piece. For example, if you grab a 1-star Bracchus, you will need to get two more 1-star Bracchus and they will automatically combine into a 2-star. To get a 3-star, you will need to do the same thing and get three 2-star Bracchus pieces for them to combine into a 3-star.
3-stars are the highest pieces can be combined. Synergies are also something you need to pay attention to. Maybe not so much in the Murkwood event Arena as they tend to be easier and faster, but if you ever do actual Arena, synergies are key to winning and getting good reward payouts.
I hope this answers your question and that it helps you progress further in Arena.
